CRISIS AND OPPORTUNITY IN THE PROFESSIONS
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RESEARCH IN ETHICAL ISSUES IN ORGANIZATIONS Series Editor: Moses L. Pava Associate Editor: Patrick Primeaux Recent Volumes: Volume 1: 1999 Edited by Moses L. Pava and Patrick Primeaux Volume 2:
2000 Symposium on Health Care Ethics Edited by Moses L. Pava and Patrick Primeaux Volume 3: 2001 The Next Phase of Business Ethics: Integrating Psychology and Ethics Guest edited by John Dienhart, Dennis Moberg and Ron Duska Volume 4: 2002 Re-imagining Business Ethics: Meaningful Solutions for a Global Economy Edited by Moses L. Pava and Patrick Primeaux Volume 5:
2004 Spiritual Intelligence at Work: Meaning, Metaphor and Morals Edited by Moses L. Pava and Patrick Primeaux
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RESEARCH IN ETHICAL ISSUES IN ORGANIZATIONS VOLUME 6
CRISIS AND OPPORTUNITY IN THE PROFESSIONS EDITED BY
MOSES L. PAVA Sy Syms School of Business, Yeshiva University, New York, USA Asssociate Editor
PATRICK PRIMEAUX St John’s University, New York, USA
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CONTENTS LIST OF CONTRIBUTORS
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STATEMENT OF PURPOSE
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EDITORIAL BOARD
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INTRODUCTION: CRISIS AND OPPORTUNITY IN THE PROFESSIONS Moses L. Pava
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ETHICAL CONSIDERATIONS IN THE CHANGING ENVIRONMENT OF HUMAN SERVICE ORGANIZATIONS Margaret Gibelman and Sheldon R. Gelman
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ETHICAL CHALLENGES IN MEDICINE Michael Rothberg
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THE HISTORY AND ROLE OF THE INSURANCE PROFESSIONAL Ron Duska
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THE PROFESSIONAL RESPONSIBILITIES OF LAWYERS: A STAKEHOLDER APPROACH Tara J. Radin
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IN SEARCH OF THE COMPUTER ‘PROFESSIONAL’: AN AUSTRALIAN PERSPECTIVE Michael Schwartz
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CONTENTS
FROM MECHANICAL TO MEANINGFUL SOLUTIONS IN THE ACCOUNTING PROFESSION Moses L. Pava
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PRESSURES ON THE MANAGER IN THE ORGANIZATION: OBSTACLES AND AIDS TO ETHICAL BEHAVIOR Gerald F. Cavanagh S. J.
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CURRENT ETHICAL DILEMMAS OF ADVERTISING PROFESSIONALS Deborah Y. Cohn
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PRIESTS AND THE CHURCH: PROPHETS OR BUFFOONS? Patrick Primeaux
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HOW IS ‘‘BUSINESS ETHICS’’ POSSIBLE? James E. Roper
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A PHILOSOPHICAL PERSPECTIVE ON CORPORATE CODES OF ETHICS James E. Roper
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THE RATIONALE FOR, AND SCOPE AND METHOD OF, TEACHING PROFESSIONAL ETHICS TO BUSINESS MANAGERS Kenneth S. Bigel
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‘‘ARE PROFESSIONALS MYTHICAL HEROES?’’ Michel Dion
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LIST OF CONTRIBUTORS Kenneth S. Bigel
Lander College for Men, Kew Gardens Hills, NY, USA
Gerald F. Cavanagh S.J.
University of Detroit Mercy, Detroit, MI, USA
Deborah Y. Cohn
Sy Syms School of Business, Yeshiva University, New York, NY, USA
Michel Dion
Universite´ de Sherbrooke, Canada
Ron Duska
The American College, Bryn Mawr, PA, USA
Sheldon R. Gelman
Wurzweiler School of Social Work, Yeshiva University, New York, NY, USA
Margaret Gibelmany
Wurzweiler School of Social Work, Yeshiva University, New York, NY, USA
Moses L. Pava
Sy Syms School of Business, Yeshiva University, New York, NY, USA
Patrick Primeaux
St. John’s University, New York, NY, USA
Tara J. Radin
Hofstra University, Hempstead, NY, USA
James E. Roper
Michigan State University, East Lansing, MI, USA
Michael Rothberg
Baystate Medical Center, Springfield, MA, and Tufts Medical School, Boston, MA, USA
Michael Schwartz
Royal Melbourne Institute of Technology, Melbourne, Victoria, Australia vii
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STATEMENT OF PURPOSE The purpose of the series is to explore the central and unique role of organizational ethics in creating and sustaining a flourishing, pluralistic, free enterprise economy. The primary goal of the research studies published here is to examine how profit seeking and not for profit organizations can be conceived and designed to satisfy legitimate human needs in an ethical and meaningful way. Ethical Issues in Organizations encourages authors to submit rigorous research studies (essayistic or empirical) from a wide variety of academic perspectives including (but not limited to) business management, philosophy, sociology, psychology, religion, accounting, finance and marketing. Relevant book reviews are also invited. Acceptable manuscripts probe important issues in organizational ethics and do so in ways that make original and substantial contributions to the existing business ethics literature. These studies are written in a clear and convincing style. The editorial board pledges timely editorial decisions and prompt publication. Please send 3 copies of completed manuscripts to: Dr. Moses L. Pava Editor Ethical Issues in Organizations Yeshiva University 500 W. 185th St. New York, NY 10033, USA
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EDITORIAL BOARD Joseph L. Badaracco, Jr. Harvard University
William Frederick University of Pittsburg
Ida Berger Queens University
Al Gini Loyola University/Chicago
Norman Bowie University of Minnesota
Kenneth E. Goodpaster University of St. Thomas
M. Neil Browne The Aspen Institute
Ellen McCorkle Harshman St. Louis University
Wesley Cragg York University
Laura Pincus Hartman University of Wisconsin-Madison
Thomas W. Dunfee University of Pennsylvania
Daryl Koehn University of St. Thomas-Houston
Ron Duska The American College
Kimball R. Marshall Jackson State University
Georges Enderle University of Notre Dame
E. Sharon Mason Brock University
Edwin Epstein University of California at Berkeley
Douglas McCabe Georgetown University Alex Michalos University of Northern, British Columbia
Amitai Etzioni George Washington University xi
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Barry Mitnick University of Texas/Austin Michael Schwartz Royal Melbourne Institute of Technology
EDITORIAL BOARD
Meir Tamari Jerusalem Institute of Technology Steven Wartick University of Missouri-St. Louis
INTRODUCTION: CRISIS AND OPPORTUNITY IN THE PROFESSIONS The topic of Volume 6 in Research in Ethical Issues in Organizations is the changing role of the professional in today’s organizations. Organizations have evolved dramatically over the past 25 years. In both the for-profit and the not-for-profit sectors, there is increasing focus on short-term bottom-line results. Professionals, inside these organizations, are increasingly being compensated based on precise measures such as number of students per class, patients seen per hour, billable hours, dollar amount of tax savings for clients, earnings per share, stock prices, students’ scores on standardized tests, church attendance, etc. As organizational goals become ever more quantified, the role of the professional has changed. In almost every profession, a growing conflict of interest now exists between the push of the organization’s highly specific and measurable goals on the one hand and the pull of professional standards and values on the other. Writing recently in the Business Ethics Quarterly, Thomas Donaldson noted that ‘‘Conflicts of interests for professionals working in corporations recur with disturbing regularity, and often have serious consequences’’ (2000, p. 83). In his paper, he describes two specific instances where a group of professionals seemingly failed to meet long-standing professional standards. In the first instance, the American Medical Association entered into a highly questionable contractual arrangement with Sunbean and agreed to give the company its exclusive approval for a line of home-health products. In the second instance, Donaldson notes the failure of the legal profession and scientific community to meet minimal ethical requirements in its longstanding dealings with the tobacco industry. I believe that, in this paper, Donaldson has put his finger on one of the most significant issues facing contemporary society: How can we protect the xiii
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INTRODUCTION
professions and how can the professions protect themselves in a culture increasingly dominated by the ethos of the bottom line? Donaldson is almost certainly correct that viewing business managers as professionals will, in the long run, help to provide ‘‘sufficient moral free space for other professionals to achieve their professional ends’’ (p. 91). But perhaps even more important than this is the role for the professions themselves in boosting and strengthening their own identities. If the professions are to maintain and expand this zone of ‘‘moral free space,’’ the professions will have to take an active role in ensuring this outcome. The purpose of this book is to identify and describe these conflicts of interests in a wide variety of professional fields and to examine a number of specific questions. Authors who contributed to this volume were asked to consider the following questions as they pertain to their specific area of expertise: To what extent has your profession maintained its autonomy? How does the profession compare to other professions in terms of autonomy? Has the role of the profession expanded or contracted in recent years? To whom is the profession responsible? What response, if any, has the profession taken with regard to these changes? Has the profession increased or decreased its self-regulation? Has it over hauled its code of ethics? Has the government increased or decreased its regulation of the profession? Do you view the changes in the profession over the past 25 years as positive or negative? Has the public benefitted or been harmed by these changes? In what specific ways will the profession evolve in the future? This volume includes articles on medicine, law, accounting, social work, clergy, insurance, computer professionals, and advertising experts, among others, written by experts in their respective fields. In addition, this volume includes a number of broader pieces related to the topic of professionalism. These articles provide a useful context for further discussions on these important issues to our society. This volume documents much evidence to support the contention that there is a growing crisis in the professions, one that is certainly not limited to one or two professions. Further, it demonstrates that there exist many common problems facing almost all professionals. In large measure these
Introduction
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common problems arise because of the emerging focus on efficiency. The good news is that there is also ample evidence that, in every profession, there are opportunities for growth, as well. The professions are facing a defining moment. This volume explores how they might respond. Moses L. Pava Editor
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ETHICAL CONSIDERATIONS IN THE CHANGING ENVIRONMENT OF HUMAN SERVICE ORGANIZATIONS Margaret Gibelmany and Sheldon R. Gelman The only certainty for human service organizations and the social work professionals they employ is that they exist and function in interrelationship with their external environments and that such environments are turbulent. To survive and thrive, human service organizations must operate as ‘‘open systems’’, aware of and sensitive to the implications of legislative, judicial, and budgetary changes, as well as changes in consumer needs and desires. Thus, changes in the external environment often necessitate changes in internal operating modes, a number of which raise serious organizational and professional ethical concerns. ‘‘Change’’ is not a benign term, particularly when the forces of change come largely from environmental forces over which human service organizations and the professional social work labor force have little, if any, control. This chapter addresses three such external forces of change that have had and continue to exert a substantial influence on how human service organizations function: managed care, financial dependency, and accountability demands. These three forces of change are selected because they are inter-connected. Managed care organizations (MCOs), in their
Crisis and Opportunity in the Professions Research in Ethical Issues in Organizations, Volume 6, 1–19 Copyright r 2005 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 1529-2096/doi:10.1016/S1529-2096(05)06001-3
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gatekeeping and rate-setting roles, have affected the financial situation of human service organizations. Similarly, MCOs join government, accrediting bodies, watchdog agencies, and citizen groups in placing yet another layer of accountability demands on those human service organizations with whom they do business. Failure to meet accountability demands places social work professionals and the agencies that employ them at risk ethically, legally, and financially (Gelman, 2001). Each of these environmental forces has influenced the business position and modes of operation of human service organizations and, in turn, impacts upon the nature of practice within these organizational settings (Schmid, 2000; Sigmond, 2004). The Social Work Code of Ethics (NASW, 1999) is used to highlight some of the compromising situations that emerge for ethical social work practice within the organizational context of practice. The following discussion includes several examples of how the profession’s ethical code and the realities of managed care, accountability demands, and financial dependence collide.
MANAGED CARE Managed care refers to a variety of integrated financing and delivery procedures for controlling, coordinating, and monitoring the delivery of health care to limit overuse of services and over-charging by professionals and to ensure that health care planning is consistent with MCO standards which may, or may not, coincide with professional standards (Barakat, 2000; Gibelman, 2001/2002). Following enactment, in 1965, of Medicare and Medicaid, utilization rates for health services exploded (Mitchell, 1998). Included in this escalating total was an increasing proportion of costs for mental health and social services. Older adults generally require more medical care and services than do younger people; with Medicare coverage, consumers had access to more of the services they needed with much of the cost covered by government. The poor have traditionally been under-utilizers of health and mental health care services, primarily because these services were unaffordable. With Medicaid, barriers to access were removed. Significantly, the population which benefitted from government health and mental health programs was to later feel the brunt of cost management efforts (Gibelman, 2001/2002). The basis for the current managed care system originated with the Health Maintenance Organization Act of 1973, which provided federal funds to develop managed care programs (Cooper & Gottlieb, 2000). The Tax Equity
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and Fiscal Responsibility Act of 1982 (P.L. 97–248) provided further financial incentives to establish pre-paid programs; and the rationale was that prepaid plans would counter the excessive costs and utilization of medical services under Medicare and Medicaid. Medicare recipients, as one highcost group, were also encouraged to join MCOs with the promise that they would get more for their dollars. The result was a boom in MCOs, the majority of which are under for-profit auspices. The failure, in the 1990s, of Congress and the president to agree upon and pass health care reform allowed the ‘‘free market’’ embracement of for-profit enterprise to gain further momentum, including both health and behavioral health care (Duska, 2000; Gibelman, 2001/2002; Van Slyke, 2003). Managed care organization (MCO) is a generic term that describes an organization that manages and controls the cost and quality of health and mental health care. MCOs include health maintenance organizations (HMO), preferred provider organizations (PPOs), competitive medical plans, and managed indemnity-insurance programs. The job of the MCO is to systematically administer health care delivery systems within a context of fiscal responsibility. Cost containment, effective marketing, active oversight of providers in terms of expenditures, type and location of care, preauthorization and/or precertification, utilization review, prospective pricing, service bundling, network development and limitations on services are emphasized (Barker, 2003; Frankel & Gelman, 2004). Most MCOs operate on a capitation basis: a fixed prepayment to a provider to deliver medical services to a certain group, such as all members of a particular health plan. Capitation generally operates as a disincentive to provide maximum service, as payment to the provider is the same no matter what services are provided (Gibelman, 2001/2002). The scope of coverage varies by plan. Mental health treatment, for example, may or may not be offered. When such coverage is offered, it is almost always limited in some way — duration of time, type of treatment, and/or restricted access to service providers . Providers must be certified by the MCO to receive referrals and payment. Social workers applying for certification as providers must meet the education, licensing, and experience requirements specified by the MCO and agree to be reimbursed at the level specified by the MCO. Cost savings lie in referring only to practitioners who will accept the flat payment rate the MCO offered and provide services only for the number of sessions authorized in advance (Gibelman, 2001/2002). Although ‘‘managed care’’ and ‘‘managed care company’’ are descriptors, these terms have developed negative connotations. Managed care is widely associated with media accounts about lack of access to needed specialists,
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denial of life-saving care, discharge from hospitals before it is medically appropriate, and the sacrifice of quality to cost control and efficiency (Duska, 2000; Epstein, 1997; Mechanic, 1997). Anecdotal evidence, too, mounts as individuals — even sophisticated, consumer-savvy individuals — find the new system of gatekeeping to be illogical and impenetrable (Gordon, 2000). Managed care affects the practice of social work in a variety of settings and in a variety of ways. Particularly vulnerable are social workers employed in hospital and other health care settings, those who specialize in mental health care in outpatient or inpatient organizational settings, those who work in the field of family and child welfare, and substance abuse treatment in public and nonprofit agencies. Social workers providing service to recipients of Medicaid and Medicare may also find themselves subject to the dictates of managed care.
Financial Impact Mental health and social service agencies are responding to actual and potential changes in the funding patterns and service emphasis by streamlining their operations. Retrenchment through layoffs or attrition has occurred at all levels of staff, but particularly middle-management. Thus, the demands upon organizations and private practitioners to serve a higher volume of clients includes the concurrent constraint of doing so with a smaller labor force. Supervision and training, which characterized traditional social work practice in health and mental settings, have become expendable and nonreimbursable activities (Siskind, 1997). Doing business with managed care companies may pose a new set of financial challenges for the human service organization. The MCO exercises the prerogative of negotiating payment terms with each provider and determining what, in its view, constitutes usual, customary, and reasonable payment for services. To obtain the managed care contract or get on the list of preferred providers, the organization must be willing to negotiate its fees. Most often, this means a lowering of fees to be competitive. By forcing providers to compete with each other for contracts, MCOs influence, if not control, the market (Eikenberry & Kluver, 2004; Van Slyke, 2003). MCOs often offer capitation contracts, in which providers are paid a fixed and pre-determined amount per client or caseload, no matter what the length of treatment. The agency is paid the same amount whether the social worker never sees the client, sees the client only a few times, or sees the client
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over the longer term (Gibelman & Whiting, 1999). Financial necessity may push the organization to provide short-term services, even if client need suggests otherwise, an ethically compromising situation for the organization and its social work employees (Peeno & Leopold, 2003). As MCOs become more significant players in mediating between clients and human service organizations, we are likely to see them gain a stronger voice in the internal professional and business practices of the organization, raising questions about who really runs the organization.
Accountability – Focus on Results Public demand for accountability continues to grow, and public and nonprofit organizations delivering human services have not been exempt from these demands. The emphasis on accountability can be seen in the increased emphasis funding bodies that are placed on demonstrating the outputs, quality, and outcomes of services (Demirag, 2004). Managed care companies, joining the earlier external bodies concerned with accountability (i.e., government, accrediting bodies) are demanding greater performance accountability (Martin, 2000). Human service organizations are being called upon to document and prove the quality and cost-effectiveness of the services they provide and to demonstrate that these services are effective in changing the lives of people (Berger, 2000). Managed care has brought with it heightened demands for accountability, with particular emphasis on documenting the successful outcomes of service. Requirements to demonstrate the effectiveness of treatment and achievement of planned outcomes are now a component of most, if not all, MCO contracts, as these companies look for results-oriented data. This orientation to measure and document goes beyond the client–worker relationship (length and type of service) and effects documentation and record-keeping requirements, billing and payment procedures, and methods for resolving disputes in regard to such matters as diagnosis and treatment needs and length and intensity of service (Gibelman & Whiting, 1999; Gibelman & Mason, 2002). Human service organizations, as part of the culture of the helping professions, have traditionally been oriented to understanding and describing process rather than documenting goals and outcomes. Now, the professional staff of human service organizations must be able to document that the services provided result in achievement of the goals detailed in the service plan — with positive effect on client well-being, circumstances,
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self-management, and/or recovery. Therefore, tracking or monitoring case progress in regard to treatment plan milestones has become an imperative component of practice (Gibelman & Whiting, 1999). Under the best of circumstances, accountability is a complex concept and an even more complex attainment. The human services have long been noted for their emphasis on process, not outcomes (Mullen & Magnabosco, 1997; Poole, Davis, Reisman, & Nelson, 2001). Human service organizations are accountable, of course, to funding sources, but also to oversight and accrediting agencies. In addition to the issues inherent in establishing the systems, including the development of performance measures to ensure accountability, there are multiple sources placing accountability demands upon human service organizations, each source of which may have its own unique requirements (Banks & Macmillan, 2004). Consider the relationship of nonprofit organizations to government. A nonprofit agency may receive funding to serve clients eligible under Medicaid and Medicare. Some clients/patients may receive their Medicaid or Medicare benefits through managed care companies, each of which may have different reporting requirements. The same agency may have contracts to serve targeted populations through the state human service agency, Housing and Urban Development, State Office of Education, Public Child Welfare Agency, and the Department of Justice (Feild, 1996). Each funding source may demand its own form of accountability for services provided and money spent. Multiple funding streams suggest multiple accountability systems. Other funding sources for nonprofits, such as United Ways, individual contributors, and foundations, may each have different expectations of and demands upon the organization. The Internal Revenue Service has its own set of rules and regulations. And ‘‘watchdog’’ agencies, such as the Better Business Bureau, also have standards of performance to which charitable organizations are expected to comply. Substantial time and effort must be devoted by the organization to meeting these accountability demands. Although it is understandable that the community served and the financial supporters of the organization’s programs would be concerned about service quality and outcome, the state of the art of measuring outcomes is under-developed. As the call for accountability has gained momentum, human service organizations have had to develop measurement systems and procedures (Martin & Kettner, 1996; Mullen & Magnabosco, 1997;Herman & Renz, 1999; Poole, Davis, Reisman, & Nelson, 2001). Managed care companies have been helpful in providing protocols for measuring outcomes and have development procedures that service-providing agencies are
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expected to follow. Such procedures are sometimes greeted by direct service workers with mixed feelings. Clearly, more paper work is involved. And the time to complete the forms is often not reimbursable to the organization. Some requirements may be considered unnecessary and lacking in utility. At the same time, human service professionals recognize the importance of assessing the extent to which interventions produce desired results.
ETHICAL CONFLICTS The impact of managed care on ethical practice transcends the totality of the health and human service fields. A growing cross-disciplinary literature reflects increasing concern about the ethical challenges posed by working within a managed care environment, including issues related to informed consent, confidentiality, integrity, human well-being, abandonment, conflict of interest, record maintenance, and business relationships. Although prescriptions for addressing ethical dilemmas are offered, there is consensus that these may not easily translate to practice (Cooper & Gottlieb, 2000; Epstein, 1997; Kontosh, 2000; Moffic, 2004), at least not until such time as there is major health care reform in the United States. The power equation in the relationship between MCOs and human service organizations is far from equal. Insurance companies and MCOs have formal authority and resource power (Strom–Gottfried, 1998). If agencies do not offer what the MCO seeks, the MCO will simply go elsewhere. A burgeoning literature is emerging to address means of organizational survival within the managed care environment (see, for example, Corcoran, & Vandiver, 1996; Emenhiser, Barker, & DeWoody, 1995). The very purpose of managed care (i.e., cost control and oversight) suggest a number of inherent conflicts with social work ethical principles. MCOs are delegated responsibility to allocate scarce health and behavioral health resources; they operate from a market-driven rather than ethical perspective (Duska, 2000). Social workers, on the other hand, operate from a value and ethical base predicated upon enhancing human well-being. Their employing organizations, too, exist – in the case of nonprofits – to fulfill a mission that concerns the betterment of individuals, families, communities, and society. The core social work value of service is recognized in the ethical principle that ‘‘social workers’ primary goal is to help people in need and to address social problems’’ (NASW, 1996, p. 5). Self-interest, according to this principle, is subsumed under the higher goal of service. Also within this principle
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is the obligation to volunteer some portion of professional time pro bono (i.e., without remuneration), a principle that can conflict with social workers’ self-interest and affect livelihood. Does the social worker continue to provide service to clients once their insurance coverage has reached its limits? If so, for how long? Does client need dictate the length of service even if there is no compensation to the agency or private practitioner? How will this pro bono service be offset? Another social work value potentially at odds with practice in a managed care environment is that of integrity, rooted in the ethical principle that social workers behave in a trustworthy manner. This principle is actualized through social workers’ continual awareness ‘‘of the profession’s mission, values, ethical principles, and ethical standards’’ and their willingness to ‘‘practice in a manner consistent with them’’ (NASW, 1999, p. 6). But awareness alone may be insufficient. A mediating factor is that of power. Insurance companies and MCOs have formal authority and resource power (Strom-Gottfried, 1998). If agencies or private practitioners do not offer what the MCO seeks or attempt to apply their own standards in place of those of the MCO, the MCO will simply take its business elsewhere (Gibelman, 2001/2002). This does not mean that efforts on the part of the profession to influence the course of managed care should be abandoned, but rather that they be undertaken with full knowledge of the power differentials (Robinson & Clay, 2002/2003). Social workers and their employing organizations can demand ethical conduct from the MCOs, use their skills to modify unethical practices, or refuse to negotiate and contract with MCOs (Kontosh, 2000). The implications of such efforts to address MCO ethical practices, however, must be understood within the context of an imbalanced relationship. Basic ethical standards, which go beyond general proscriptions, are also compromised by the specifics of MCO requirements. Some of the inherent conflicts between managed care and ethical practice include the potential compromise to client confidentiality when the MCO demands access to client records and/or detailed information about the clients presenting problem, course of treatment, and documented outcomes as a condition of authorizing care or service (Rock & Congress, 1999; Congress, 2001). The development of trust and confidence in the therapeutic relationship is affected when there is an intermediary – the MCO – between the practitioner and client. Limitations on treatment based solely on cost considerations also compromise the primacy of the client’s interests. The obligation to the client is jeopardized when the social worker acts in the dual role of caregiver and agent of the MCO (Galambos, 1999).
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Social workers are also obligated to ‘‘adhere to commitments made to employers and employing organizations’ (NASW, 1999, p. 21). But who is the employer? Is it the service delivery organization or is it the MCO that pays the organization for and prescribes the services practitioners provide? Social workers may find that they are caught in the middle between the organization and the MCO, between the MCO and clients, and between the organization and clients. The social worker’s obligation to promote the general welfare of society and ‘‘social, economic, political, and cultural values and institutions that are compatible with the realization of social justice’’ (NASW, 1999, p. 27) is also in conflict with the limitations managed care imposes on access to care and services, particularly for those with no type of health insurance. Here, issues of limitations in access to and quality of care run counter to the ethical imperative to champion the primacy of consumer need over cost and to assert the moral obligation of society to provide adequate and affordable care and services (Freud & Krug, 2002). The very affiliation with managed companies involves ethical choices; organizations and independent practitioners ‘‘buying in’’ to a system that seeks to exclude rather than include the most vulnerable population. As one commentator noted in reference to one form of managed care arrangement: ‘‘If patients are too sick and vulnerable, health maintenance organizations would prefer that they stay out of their marketplace’’ (Gordon, 2000, p. B11).
ORGANIZATIONAL IMPLICATIONS Of the immediate impacts of managed care, perhaps the most fundamental to the practice of social work is that intervention methods are now dictated by the limits on reimbursable care, often manifested in limitations on the number of visits that are covered. Long-term, open-ended therapies have been replaced by short-term, behaviorally oriented interventions (Mitchell, 1998). Social workers who work with a number of managed care companies may also find that they must alter their service approach to meet the dictates of each (Gibelman, 2001/2002; Gibelman & Mason, 2002; Gibelman & Whiting, 1999). MCOs, as intermediaries, interject themselves into each clinical decision. Social workers may find that considerable time and effort is involved in telephone arguments with insurance company representatives to obtain preapproval for every action they take or to appeal decisions made which are
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against the best interests of the client. In addition, the control of the MCO may be felt at every stage of the treatment process. Utilization reviews, in which the MCO monitors the course of treatment, that can take place before, during, and after treatment (Cooper & Gottlieb, 2000). Such reviews can become burdensome and even adversarial. As a third-party form of supervision, often conducted by persons not trained in social work, such utilization reviews also elevate bureaucratic rather than professional criteria as the focus of evaluation. To avoid such conflicts, practitioners may be inclined to accept only those clients most likely to be successfully treated within a short time frame and within prescribed methods or limit services to those who have the resources to pay for their own care. The poor and those most severely ill are most likely to suffer the ramifications of rationed care (Kocakulah & Valadares, 2003; Mechanic & McAlpine, 1999; Scheid, 2003). While the individual social work practitioner may opt out of arrangements with third party payers, this option is not available to human service organizations which depend, in varying degrees, on Medicaid/Medicare and private insurance reimbursement. These organizations face a challenging array of ethical dilemmas, foremost in regard to the primary value of client need versus the realities of reimbursement (Chaves, Stephens & Galaskiewicz, 2004). Reimbursement rates typically cover only a proportion of actual cost of service delivery and often for short periods of time, which may be insufficient in regard to resolving the specific client presenting problem. Rigid precertification and recertification requirements and limitations on the length, duration and type of treatment or service potentially compromise the organization’s service mission and its responsibilities to consumers and the public and make it vulnerable to legal liability. MCOs have also begun to introduce standardized preferred practice guidelines and protocols which indicate the preferred practices or interventions to use to address a particular client problem (Mitchell, 1998), a further insertion into the nature of professional practice. The agency must balance these external requirements against the needs of the clients served. Such balancing creates additional ethical dilemmas for social workers who’s Code of Ethics (3.09a and d) requires adherence to commitments to their employing organizations while not allowing the employing organization’s policies, procedures, regulations, or administrative orders to interfere with the ethical practice of social work (NASW, 1999, p. 21). Only providing services to clients which are reimbursable, irrespective of need or best practice, alters the nature of the traditional therapeutic relationship and clients are no longer involved in a process, but are processed (Frankel & Gelman, 2004). The focus of Managed Care is management and the bottom line is the bottom line.
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The concept of fairness, particularly as it affects vulnerable populations, would suggest that social workers may resolve ethical conflicts inherent in managed care practice by forsaking honesty and, instead, manipulate the system to allow clients to receive needed care through such means as fudging diagnoses, exaggerating symptoms, or stretching the truth to fit reimbursable care or services (O’Neill, 2000; Stone, 2000). Although the primacy of client interests may be enhanced with such actions, the ethics of such behavior is of obvious concern. Managed care has brought with it heightened demands for accountability, with particular emphasis on documenting the successful outcomes of service. The impetus of MCO requirements has forced social workers to document the outcome of their interventions; this may be seen as a positive influence of managed care and one consistent with the ethical responsibility to contribute to the social work knowledge base and share knowledge related to practice and research with colleagues (NASW, 1996). However, requirements for ongoing assessment of the results of service have come at a hefty cost to organizations and individual practitioners. Reimbursement is only for direct client contact hours. Time spent on meeting MCO accountability requirements is not reimbursable. Not only is the cost of time borne by the organization, but human service organizations have also had to incur costs related to training of staff to conduct such outcome studies and to establish tracking systems which allow for the collection, maintenance, and analysis of data. In this latter respect, many organizations have had to revamp their data collection methods in order to provide the information needed to meet accountability demands. Thus, the rules established by MCOs have led to added and uncompensated organizational expenditures, sometimes resulting in a perilous situation for service providers. Certainly, driving the smaller agencies out of business is not in the interest of consumers who fails to promote human well-being.
Impact on Consumers Managed care means that consumers no longer have the option to go to whatever health care provider they wish. Treatment and care, except for those able to buy such services in the open market, now must be ‘‘approved’’ by gatekeepers. A third party, someone other than the client/patient and care provider, may decide what treatment a client will get and for how long. And rather than being able to provide treatment according to an individualized plan based on client need, treatment, including type and duration, is
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determined on the basis of diagnostic categories and what is reimbursable (Kadushin, 1998). The days of consumer choice in selecting the type of care or treatment are over, except for private pay clients. This scenario poses a real threat to equity within the health and behavioral care systems. The managed care maze is complicated. Sophisticated consumers have been able to negotiate, to some extent, the managed care system by switching from one plan to another, appealing decisions, and watching out for their own interests. In this regard, they have asserted their right to self-determination. The less savvy consumer, however, is at a decided disadvantage. Low-income, high-risk consumers, such as those with chronic disease or mental illness, elderly people, and people with disabilities may not be able to advocate for themselves when their MCO denies coverage or limits access to required care. From this vantage point, managed care highlights the need to pursue more vigilantly another ethical imperative: social justice. The ethical principle involved is the obligation of social workers to ‘‘pursue social change, particularly on behalf of vulnerable and oppressed individuals and groups of people.Social workers strive to ensure access to needed information, services, and resourcesy’’ (NASW, 1999, p. 5). The mechanism, also codified as an ethical standard, to bring about social justice is advocacy. Here, again, however, helping professionals face a catch-22 situation. Advocacy is generally not a reimbursable service. In addition, MCOs may not respond well to what they can perceive as ‘‘badgering’’. They may construe advocacy as heresy.
ADDRESSING ETHICAL ISSUES Social workers and their employing organizations are between the proverbial ‘‘rock and a hard place’’ in regard to managed care. Managed care is a reality. Although we may see legislative or judicial action to stem MCO abuses (such as enactment of a Patient’s Bill of Rights and the granting of the legal right to sue MCOs), the prospects of fundamental change in the health care system are not evident in the foreseeable future. Social workers continue to need reliable guidelines for ethical behavior within this environment. In recent years, the social work literature has reflected the difficulties of working under managed care arrangements (e.g., Berger, 2000; Corcoran & Vandiver, 1996; Davidson, Davidson, & Keigher, 1999; Emenhiser, Barker, & DeWoody, 1995), including the ethical issues that arise from practice within this environment (e.g., Congress, 2001; Freud & Krug, 2002;
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Galambos, 1999; Mechanic, 2000; Rock & Congress, 1999; Strom-Gottfried, 1998). In response to a mounting list of concerns about the impact of managed care on the operating modes and fiscal stability of health and behavioral health organizations, the nature of professional practice, and the consumers of care and services, commentators have offered suggestions about strategic interventions. These include political advocacy, development of sound utilization review processes for use by human service agencies which are client focused and which may be adopted by MCOs, educating managed care companies about social work ethics, and developing finely tuned negotiating skills (Galambos, 1999; Gibelman & Whiting, 1999; Strom-Gottfried, 1998). Prescriptions, however, belie the power differentials noted earlier and suggest a goliath and the monster type metaphor. Although the strategies may have some impact, their implementation is marred by the day-to-day survival concerns of organizations and independent practitioners alike. The absence of immediate solutions is not a problem unique to social work. The entire health and human services enterprise confronts the same frustrations and conflicts (see, for example, Cooper & Gottlieb, 2000; Kontosh, 2000). This shared experience, however, also sheds light on the strategic approach most likely to succeed to address the ethical dilemmas that arise between managed care dictates and the ethos of sound professional practice. Alliances and coalitions among professional groups are likely to have substantially more impact on defining an agenda for change than any efforts one profession may have on its own. Advocacy oriented to professional associations is needed to challenge them to take a more active role within the health and behavioral health care industry. A first step to minimize, if not resolve, ethical conflicts is to acknowledge that such conflicts are an inevitable byproduct of managed care (Barakat, 2000). The inherent contradictions between ethical practice and managed care suggest the need for a new concept of professionalism that takes into account the external realities and recognizes constraints (Mechanic, 2000). Such a new conceptualization does not discard the values and ethical principles upon which the profession of social work is predicated. Rather, certain values and principles need to be emphasized which protect and enable social work practice within the context of a managed care environment. First among these principles is that of ‘‘do no harm’’ (nonmaleficience) and, through the use of social work knowledge and skills and the pursuit of alternative options, aid clients to further their own interests (beneficence) (Kontosh, 2000). Included under beneficence is an emphasis on client
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advocacy, procedural justice (in addition to social justice), better systems of information and referral, and new types of client partnerships. The Code of Ethics of the National Association of Social Workers (1999) identifies advocacy as a basic obligation of the profession and its members: Social workers should engage in social and political action that seeks to ensure that all persons have equal access to the resources, employment, services, and opportunities that they require in order to meet their basic human needs and to develop fully. Social workers should be aware of the impact of the political arena on practice, and should advocate for changes in policy and legislation to improve social conditions in order to meet basic human needs and promote social justice (NASW, 1996, p. 27). Advocacy has been defined as ‘‘the act of directly representing or defending others’’ (Barker, 1999, p. 11). Within social work, advocacy can be oriented to the ‘‘case’’ or ‘‘cause’’ level. Case advocacy refers to actions taken with or on behalf of a particular client or group of clients; cause or social advocacy refers to actions that are initiated to address a common issue or problem affecting groups of people (Council on Accreditation [COA], 2001). Enabling, brokering, mediating, and educating are among the advocacy interventions that may be employed to achieve change in the socio-economic and/or political conditions that affect the well-being of clients (Mickelson, 1995; Lens & Gibelman, 2000). As noted above, however, the use of advocacy tools by social workers to protect and further the interests of clients is compromised by several mitigating factors. Agency support is a critical dimension in whether and to what extent the professional workforce engages in advocacy. This is because reimbursement formulas are tied to diagnostic treatment categories, thus limiting the range of practice technologies encouraged by the agency or reimbursed by third-party payers (Chaves, Stephens, & Galaskiewicz, 2004; Lens & Gibelman, 2000). Another inhibiting factor is the apparent disinterest among a large proportion of social workers to engage in advocacy. Studies of the career development of social workers suggest that there is a strong tendency to emphasize a psychological rather than psycho-social perspective (Gibelman & Schervish, 1996; Specht & Courtney, 1994). Although all professional social workers are exposed, through formal social work education, to the concepts, methods, and ethical imperatives associated with advocacy, the nature of organizational and independent practice today may obscure its centrality. Further, social workers may conclude that advocacy practice may pose risks. For example, the social worker may be caught between advocating for a client who needs additional treatment or services and, at the
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same time, supporting the MCOs goal of cost containment (Cooper & Gottlieb, 2000). Advocacy efforts can also put workers in direct conflict with the agencies that employ them given the growing financial dependence of the agency on MCOs and the need to remain financially viable. While there are clearly obligations to clients, workers also have ethical obligations to their employers. Any new paradigm for the delivery of social work services involves active collaboration between employing organizations, the social work education community, and associations representing social work professionals, such as the National Association of Social Workers and the Society for Clinical Social Workers. The goal of social work education is to prepare social workers for practice (CSWE, 1994). The nature of practice, however, has changed in fundamental ways as a result of managed care and continues to evolve at a rapid rate. Educational curricula has not always kept pace. Certainly, more emphasis is needed within social work education on ethical decision-making, methods of empirical validation of treatment and services, short-term methodologies, and work with inter-disciplinary teams to ensure that practitioners are prepared for competent managed care practice. In addition, course material oriented to the business, economic, and administrative aspects of managed care would facilitate not only the competencies of social workers to practice within this environment, but also increase their ability to influence ethically driven modifications in the system. Collaboration, both within the profession and across health and behavioral health disciplines, can also include broad-scale research to document the impact of managed care on consumers, professionals, and agencies. To date, most research has focused on the client-provider relationship. The ethical components of managed care could be studied through such techniques as critical incidents analysis as the basis for understanding practitioners’ actual experiences (Cooper & Gottlieb, 2000). Such collaborations can also be useful in identifying options to limited services. The aggregation and dissemination of information about alternative service providers, in the form of a ‘‘super’’ information and referral system, can help fill the gaps of MCO-funded services (Kontosh, 2000).
CONCLUSION Many of the external influences identified above reverberate throughout the organization in regard to program, funding, the rules and regulations for how services are carried out, and even the type of people who are hired to do
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the organization’s work. These externally induced changes are a product of the changing context of human services and they are ongoing. They require human service organizations to accommodate and some of these accommodations may be ethically compromising for the organization and its professional work force. Despite the many vocal critics of managed care, the salience of cost containment is not likely to abate. There is every indication that managed care, even in modified form, will endure and continue to operate from a bottomline, business perspective (Duska, 2000). We have already begun to witness the extension of managed care models into new service arenas, such as family and child welfare services. Experiments with capitation for foster and group home care, intended to motivate more rapid permanency planning, have been implemented on a selective basis. In recent years, many states have contracted with MCOs to manage some or all of their Supplemental Security Income (SSI) and Temporary Assistance to Needy Families (TANF) programs (Davidson, Davidson, & Keigher, 1999). More, rather than less managed care appears likely in the future. The outcome of external environmental forces will have a substantial impact on the provision of care and services; momentum for change builds, but the form it may take is elusive. In the interim, the inherent conflicts between managed care practice and ethical practice will need to be resolved, on a case by case basis, with special attention to the risks of those most vulnerable to system abuses (Gibelman, 2001/2002). Concurrently and on a more systemic level, inter-professional collaborations can also provide a greater source of pressure on MCOs to address the more flagrant system flaws and heighten the level of influence within the state and national political arenas in regard to legislative and judicial protections. Such collaborations may have the added result of making social workers and allied professionals more effective players in health and behavioral health care policy making.
REFERENCES Banks, S., & Macmillan, P. (2004). Ethics, accountability and the social professions. British Journal of Social Work, 24(7) XIV & 221. Barakat, P. (2000). Ethics in managed care. Business and Economic Review, 46(3), 26–27. Barker, R. L. (1999). Social work dictionary (4th ed.). Washington, DC: NASW Press. Barker, R. L. (2003). Social work dictionary (5th ed.). Washington, DC: NASW Press. Berger, C. S. (2000). Managed care: Challenges to survival and opportunities for change. Smith College Studies in Social Work, 71(1), 19–34.
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Chaves, M., Stephens, L., & Galaskiewicz, J. (2004). Does government funding suppress nonprofits’ political activity. American Sociological Review, 69(2), 295–316. Cooper, C. C., & Gottlieb, M. C. (2000). Ethical issues with managed care: Challenges facing counseling psychology. Counseling Psychologist, 28(2), 179–236. Congress, E. P. (2001). Resolving ethical dilemmas in social work practice. Affilia, 16(1), 113–616. Corcoran, K., & Vandiver, V. (1996). Maneuvering the maze of managed care: Skills for mental health practitioners. New York: Free Press. Council on Social Work Education (CSWE) (1994). Handbook on accreditation standard’s and procedures. Alexandria, VA. Council on Accreditation for Children and Families (COA), (2001). Standards and self-study manual, private not-for-profit and for-profit organizations (7th ed). New York. Davidson, T., Davidson, J. R., & Keigher, S. M. (1999). Managed care: Satisfaction guaranteedyNot!. Health & Social Work, 24(3), 163–171. Demirag, I. (2004). Toward better governance and accountability. The Journal of Corporate Citizenship, 15(Autumn), 19–26. Duska, R. G. (2000). Managed care and insurance: Some ethical considerations. Journal of Financial Service Professionals, 54(5), 68–77. Eikenberry, A. M., & Kluver, J. D. (2004). The marketization of the nonprofit sector: Civil society at risk. Public Administration Review, 64(2), 132–140. Emenhiser, D., Barker, R., & DeWoody, M. (1995). Managed care: An agency guide to surviving and thriving. Washington, DC: Child Welfare League of America. Epstein, A. M. (1997). Medicaid managed care and high quality: Can we have both? Journal of the American Medical Association, 278(19), 1617–1621. Feild, T. (1996). Managed care and child welfare: Will it work? Public Welfare, 54(3), 4–10. Frankel, A. J., & Gelman, S. R. (2004). Case management: An introduction to concepts and skills (2nd ed.). Chicago, IL: Lyceum Books. Freud, S., & Krug, S. (2002). Beyond the code of ethics: Complexities of ethical decision making in social work practice. Families in Society, 83(5/6), 474–482. Galambos, C. (1999). Resolving ethical conflicts in a managed care environment. Health & Social Work, 24(3), 191–197. Gelman, S. R. (2001). On being an accountable profession: The code of ethics, oversight by boards of directors, and whistle-blowers as a last resort. In: A. Roberts & G. Greenen (Eds), Social worker’s desk reference (pp. 75–81). New York: Oxford University Press. Gibelman, M. (2001/2002). Managed care and ethical social work practice: An oxymoron? Social Welfare Forum, 35(Winter/Spring), 47–65. Gibelman, M., & Mason, S. E. (2002). Treatment choices in a managed care environment: A multi-disciplinary exploration. Clinical Social Work Journal, 30(2), 199–214. Gibelman, M., & Schervish, P. (1996). The private practice of social work: Current trends and projected scenarios in a managed care environment. Clinical Social Work Journal, 24(3), 323–338. Gibelman, M., & Whiting, L. (1999). Negotiating and contracting in a managed care environment: Considerations for practitioners. Health & Social Work, 24(3), 180–190. Gordon, S. (2000, June 15). Commentary: Perspectives on health care; HMOs fight the sick instead of the sickness. Los Angeles Times, p. B11. Herman, R. D., & Renz, D. O. (1999). Theses on nonprofit organizational effectiveness. Nonprofit and Voluntary Sector Quarterly, 28(2), 107–126.
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Kadushin, G. (1998). Adaptations of the traditional interview to the brief-treatment context. Families in Society, 79(4), 346–357. Kocakulah, M. C., & Valadares, K. J. (2003). Cost offset effect strategies for provision of mental health care services. Journal of Health Care Finance, 30(1), 31–40. Kontosh, L. G. (2000). Ethical rehabilitation counseling in a managed-care environment. Journal of Rehabilitation, 66(2), 9–13. Lens, V., & Gibelman, M. (2000). Advocacy be not forsaken! Retrospective lessons from welfare reform. Families in Society: The Journal of Contemporary Human Services, 81(6), 611–620. Martin, L. L. (2000). The environmental context of social welfare administration. In: R. J. Patti (Ed.), Handbook of Social Welfare Management, (pp. 55–67). Thousand Oaks, CA: Sage. Martin, L. L., & Kettner, P. M. (1996). Measuring the performance of human service programs. Thousand Oaks, CA: Sage. Mechanic, D. (1997). Managed care as a target of distrust. Journal of the American Medical Association, 277(22), 181–1811. Mechanic, D. (2000). Managed care and the imperative for a new professional ethics. Health Affairs, 19(5), 100–111. Mechanic, D., & McAlpine, D. D. (1999). Mission unfulfilled: Potholes on the road to mental health parity. Health Affairs, 18(5), 7–21. Mickelson, J. S. (1995). Advocacy. In: R. L. Edwards (Ed.), Encyclopedia of Social Work (19th ed., pp. 95–100). Washington, DC: NASW Press. Mitchell, C. G. (1998). Perceptions of empathy and client satisfaction with managed behavioral health care. Social Work, 43(5), 404–411. Moffic, H. S. (2004). Managed behavioral healthcare poses multiple ethical challenges for clinicians. Psychiatric Annuals, 34(2), 6–20. Mullen, E. J., & Magnabosco, J. L. (Eds) (1997). Outcome measurement in the human services: Cross-cutting issues and methods. Washington, DC: NASW Press. National Association of Social Workers. (1996). Code of Ethics. Washinton, D.C: Author. National Association of Social Workers. (1999). Code of Ethics, Rev. Washington, DC: Author. O’Neill, J. V. (2000). Social work jobs abound. NASW News (September), 1–4. Peeno, L., & Leopold, T. J. (2003). When HMOs put profits over patients. Train, 39(4), 18–75. Poole, D. L., Davis, J. K., Reisman, J., & Nelson, J. E. (2001). Improving the quality of outcome evaluation plans. Nonprofit Management & Leadership, 11(4), 405–421. Robinson, J. E., & Clay, T. (2002/2003). Protecting the public interest: Issues in contracting managed behavioral health. Journal of Health and Human Services Administration, 25(3/4), 452–470. Rock, B., & Congress, E. (1999). The new confidentiality for the 21st century in managed care environment. Social Work, 44(3), 253–262. Scheid, T. L. (2003). Managded care and the rationalization of mental health services. Journal of Health and Social Behavior, 44(2), 142–177. Schmid, H. (2000). Agency–environment relations: Understanding task environments. In: R. J. Patti (Ed.), Handbook of Social Welfare Management, (pp. 133–154). Thousand Oaks, CA: Sage. Sigmond, R. M. (2004). For-profit or not-for-profit health care in today’s environment: Does it matter? Topics in Stroke Rehabilitation, 11(1), 89–91. Siskind, A. (1997). Agency mission, social work practice, and professional training in a managed care environment. Smith College Studies in Social Work, 67, 16–19.
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Specht, H., & Courtney, M. (1994). Unfaithful angels: How social work abandoned its mission. Chicago: Aldine deGruyter. Stone, D. (2000). Rationing compassion: A fable for our time. The American Prospect, 11(13), 16–18. Strom-Gottfried, K. (1998). Applying a conflict resolution framework to disputes in managed care. Social Work, 43(5), 393–401. Van Slyke, D. M. (2003). The mythology of privatization in contracting for social service. Public Administration Review, 63(3), 296–315.
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ETHICAL CHALLENGES IN MEDICINE Michael Rothberg INTRODUCTION From the very beginning of medical practice, physicians have enjoyed a degree of autonomy which exceeds that of almost any other profession. Although regulated by state medical boards, and limited by the threat of litigation, physicians are generally held in high esteem by society and allowed to practice medicine as they see fit. Physicians have usually been allowed to prescribe any drug for any disease, including the so-called ‘‘offlabel’’ uses for which Food and Drug Administration (FDA) approval has not been obtained. They can also use new or untested medical devices and surgical procedures, as long as they obtain informed consent from the patient. Society has trusted doctors to do the right thing for their patients, and thus tried not to interfere with the sacred doctor–patient relationship. Up until World War II, outside forces rarely infringed on the relationship between the patient and his doctor. Doctors charged fees for their services, often adjusted to account for the means of their patients, and market forces prevailed. For the most part, all physicians could offer to their patients were their time and caring, and a few medicines. There was little available in the way of expensive diagnostic testing, procedures, hospitalization and medications. As a result, most patients could afford their doctors. During the labor shortage and concomitant wage freezes enacted during the Second World Crisis and Opportunity in the Professions Research in Ethical Issues in Organizations, Volume 6, 21–41 Copyright r 2005 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 1529-2096/doi:10.1016/S1529-2096(05)06002-5
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War, employers searched for additional benefits to provide prospective workers, and health insurance was born. After the war, health insurance became inextricably linked with employment, until the 1960s, when the federal government created Medicare and Medicaid to expand health coverage to the elderly, disabled and impoverished, as a first step toward universal health insurance (Iglehart, 1999a). With the advent of insurance, physicians were no longer financially accountable to their patients. Just as the means to pay for expanded health care were being introduced, remarkable improvements in technology and pharmaceuticals created an ever-expanding array of health care services. With virtually no budgetary constraints, consumers demanded as much health care as possible, and medical costs began an unprecedented rise, which continues to this day. The persistent growth in healthcare spending took an increasingly large bite out of the profits of those who were paying the employees’ health bills. In the late 1980s, in response to this economic reality, managed care took off. Health maintenance organizations (HMOs), which had begun in the 1940s as a social movement to improve continuity and quality of care, metamorphosed into ‘‘entrepreneurial agents of cost containment,’’ limiting access to technology and specialists, and aggressively negotiating with doctors, hospitals and drug manufacturers (Kuttner, 1998). Instead of paying usual and customary charges, as Medicare had done since its inception, HMOs wielded market power to reduce payments to doctors and to set rates according to their own terms. Medicare followed suit by setting a uniform physician’s fee schedule, which does not allow individual physicians to set their own fees (Iglehart, 1999a). In addition, HMOs appointed primary care physicians as ‘‘gatekeepers’’ whose role was to limit access to expensive tests and specialty care. Many plans went so far as to shift financial risk to the contracted physicians (Kuttner, 1998). Most often this took the form of capitation, where physicians received a lump sum for all patient care, regardless of the amount of care provided. Other incentive programs put physicians at risk for overruns in pharmacy costs, diagnostic testing and specialty care. Such systems pitted the physician’s financial interest directly against his fiduciary duty to the patient, engendering mistrust of both HMOs and physicians (Kao et al., 2001; Mechanic & Schlesinger, 1996; Pereira & Pearson, 2001). To some extent, physicians are more autonomous in 2005 than they were 10 years earlier, as physicians and patients have succeeded in rolling back many of the most egregious practices of managed care. The restrictive policies of the early 1990s gave way to more patient choice, and better physician reimbursement. Preferred provider organizations allowed patients – for a fee
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– to seek care from doctors outside of their HMO network, there was less emphasis on the gatekeeper, and capitation virtually ended. Instead, HMOs began to resemble traditional insurers, offsetting costs by raising their premiums. When businesses again objected to increasing premiums, insurers responded by shifting risk to the patients/employees in the form of higher copays for medical treatment, including physician visits, diagnostic testing, pharmaceuticals, emergency room visits and even hospitalizations. Employee contributions to healthcare costs are now rising much faster than those of their employers and even faster than healthcare costs themselves (Baker, 2004). Whereas, in 1990, only 16% of employers offered plans with a deductible of $250 or more, by 1995, the percentage had increased to 43% (Kuttner, 1999). By 2000, the proportion of state and local government workers in non-HMO plans who were paying deductibles had risen to 72% (Baker, 2004). Employee contributions to health insurance premiums are also rising, encouraging employees to gamble on high-deductible policies with lower premiums. Indeed, the so called catastrophic insurance, with deductibles of $500 or more, is the fastest growing segment of the insurance industry. Surveys of large corporations found that 26% plan to offer highdeductible plans, up from 14% this year, and another 50% were considering adding them (Alonso-Zaldivar, 2005). As physicians compete for limited healthcare dollars, conflicts arise between the physician’s financial health and the patient’s physical health. These conflicts generally fall into four separate spheres: interactions with pharmaceutical companies or device makers, physician self-referral, interactions with managed care and insurance issues, including lack of insurance and underinsurance. I will describe each of these conflicts, outline the official response of organized medicine and government, and critically appraise these responses.
PHYSICIANS AND DRUG COMPANIES Physicians have always relied upon apothecaries to provide the remedies that they prescribe. What have changed, however, are both the efficacy of the drugs and the profitability of the pharmaceutical industry. Some of today’s drugs do, in fact, save lives, while others provide relief for conditions that had previously lacked effective treatment. At the same time, many new expensive medicines provide no measurable benefit over existing therapies; some are used by physicians to treat diseases for which the medication has not been proven effective (‘‘off-label’’ use), and others are even harmful.
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Although the FDA has a mandate to ensure that drugs are both safe and effective, they often fail to adequately monitor drugs once they have cleared the initial application period. Moreover, the FDA has its own conflict of interest: drug companies pay hefty fees to have their new drugs licensed, and many FDA officials work as paid consultants for the companies they are assessing. The recent Vioxx fiasco illustrates this point. After initial studies proved Vioxx to be safe and effective, the FDA was slow to move when additional data emerged showing that Vioxx had long-term cardiovascular risks. In February 2005, an FDA panel voted to reintroduce Vioxx, and to keep its competitor Bextra (which also raised safety concerns) on the market. The 10 panel members with ties to industry were crucial in winning both votes (Harris & Berenson, 2005). Despite voting 9-1 in favor of both medications (other panel members voted 14-8 against), 8 of the 10 panel members paid to consult for the manufacturers of these drugs denied that they were influenced by these connections. Winning an FDA indication for a drug often requires studying tens of thousands of patients from multiple centers over several years. It is estimated that developing one new drug costs between $300 million and $600 million (Bodenheimer, 2000). After such an investment, drug companies expect generous returns. However, they can profit only if physicians prescribe their drugs. It is not surprising, then, that drug companies spend twice as much on advertising as they do on research and development. Despite a recent rise in direct-to-consumer advertising, 90% of drug company advertising is still spent on physicians, including detailing (pharmaceutical representatives meeting with individual physicians to deliver samples and discuss specific products), print advertising in medical journals, and various promotions, such as gifts, grants and consultancies. Accepting financial gain from pharmaceutical companies is problematic because it introduces bias into the physician–patient relationship, or worse, into academic research on the use of pharmaceuticals. The same logic can be extended to relationships with the makers of medical devices, who are not under the purview of the FDA, but who use the same tactics to influence physicians. Practicing clinicians are directly responsible for prescribing the drugs or devices their patients receive. If they allow pharmaceutical companies to influence their judgment through gifts, so that the care they give is not guided solely by the best interests of their patient, they violate their fiduciary duty. As I will demonstrate, a self-serving bias innate to human physicians often allows them to believe they can accept gifts and still be guided solely by the interests of their patients. Academic physicians have even more opportunities to be influenced directly and indirectly by the
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pharmaceutical industry, and these influences may be even more harmful because biased research and publications can affect the care of thousands or even millions of patients. I will deal with each of these conflicts individually. Practicing clinicians have frequent contact with the representatives of pharmaceutical companies. Such relationships can benefit patients, because physicians often receive free samples of medications to hand out to patients, along with scientific information on the latest drugs and professional guidelines. Harried physicians may use this efficient resource to keep their practice current. This relationship is not necessarily wrong, as long as the physician realizes that the representatives are not disinterested educators but salesmen, and that the ‘‘scientific’’ information presented will be largely promotional. However, this is seldom the case. The relationship between physicians and drug companies typically begins in medical school, where medical students are treated to free meals, as well as gifts such as textbooks or medical equipment emblazoned with product logos. Students quickly become used to these relationships, which continue into residency and beyond. Residents often have all their lunches provided for free by drug companies that sponsor noontime conferences. Doctors come to believe both that they are entitled to free meals, pens, textbooks, etc., and that these gifts do not affect them. As doctors complete their training and advance through their careers, the relationship changes. Meals are fewer, but more lavish; gifts more often take the form of free drug samples, honoraria, tickets to entertainment, free travel, consultancies and financial incentives to enroll patients in clinical trials (Blumenthal, 2004). Relationships between drug companies and practicing doctors are ubiquitous. In 2001, the pharmaceutical industry employed 90,000 representatives for detailing, or 1 representative for every 4.7 office-based physicians (Blumenthal, 2004). Estimates of annual marketing expenditures range from $8,000 to $15,000 per physician. One study found that 83% of internists at the University of Maryland met with drug representatives in the past year, (Ferguson et al., 1999) and a survey by the Kaiser foundation reported that 92% of physicians received free drug samples (Blumenthal, 2004). Other surveys found that meetings with pharmaceutical representatives occur about four times a month, and that this frequency stabilizes during residency and continues on into practice (Wazana, 2000). At my academic faculty practice, we do not stock free samples, and the attending physicians do not generally interact with the pharmaceutical representatives, but representatives do provide meals for the residents and staff approximately twice a week. A quick survey of our clinic revealed advertisements for 44 different
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medications on items ranging from pens and post-it notes to calendars, clocks and medical equipment. There is a large and compelling literature, which demonstrates that despite physician beliefs to the contrary, even the acceptance of small gifts affects prescribing patterns (Wazana, 2000). Physicians who accept gifts are more likely both to prescribe expensive medications in the absence of proven benefit and to advocate for their inclusion in the hospital formulary (Chren & Landefeld, 1994). Because the self-serving bias introduced as a result of accepting gifts occurs on a subconscious level, it is impossible to overcome (Dana & Loewenstein, 2003). Not surprisingly, physicians are better at identifying the problem in others than in themselves. Thus, 61% of residents thought that they were not influenced by interactions with drug companies, but only 16% thought the same of their fellow residents (Steinman, Shlipak, & McPhee, 2001). Social science experiments show that even when bias is fully acknowledged, attempts to compensate fail to do so (Dana & Loewenstein, 2003). Even physicians who recognize that gifts from drug companies are ethically problematic nonetheless find them difficult to resist. Among residents and faculty who stated that drug lunches and pens were problematic, 100% said that they had accepted, or would accept, such gifts (Steinman, Shlipak, & McPhee, 2001). More than 50% would accept an antibiotic guide, an article or attend a social function despite believing these things to be inappropriate. Egregious practices of the past, including cash payments or frequent flyer miles tied directly to the writing of prescriptions, led to attempts to regulate and reform the relationship between doctors and drug companies. Early attempts came from both the doctors’ organizations and the pharmaceutical industry. The American Medical Association suggested a $100 limit on gifts accepted by physicians. Compliance with the guideline was never monitored, nor were any penalties imposed on those who did not comply. Studdert et al., review the legal history of self-regulation under the threat of federal prosecution (Studdert, Mello, & Brennan, 2004). The federal government, which through Medicare and Medicaid is the largest single payer in the United States, has several tools at its disposal to regulate the relationship between physicians and industry. The anti-kickback statute, passed in 1972, criminalizes the provision of remuneration by suppliers of services to the physicians who order them. These relationships include obvious kickbacks, such as cash payments to referring physicians for specific tests, but could be interpreted more broadly. A second law, the False Claims Act, provides for civil liability and imposes stiff fines of $5,000 – $11,000 per claim plus triple damages. In addition, the False Claims Act provides for
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whistle-blower actions, in which private individuals with insider knowledge can bring suit on behalf of the government against those who submit false claims, and collect 15–30% of the damages awarded to the government. Taken together, these statutes allow for criminal prosecution of kickback schemes, while rewarding potential whistle-blowers with sizable cash incentives. Studdert cites the 1997 investigation and subsequent prosecution of TAP pharmaceuticals for encouraging urologists to bill Medicare for the full wholesale price of Lupron, an agent administered by urologists in the treatment of prostate cancer, while providing the Lupron to the urologists for free or at highly discounted prices. This difference in price, which flowed directly to the urologists, amounted to cash incentives to use Lupron. TAP settled with an agreement to pay $290 million in criminal fines plus $585 million in civilian penalties, opening a string of lawsuits against other pharmaceutical companies. In response, in 2002 and 2003, a number of bodies, including the American Medical Association (AMA), Pharmaceutical Research and Manufacturers of America (PhRMA), the American College of Physicians (ACP) (Coyle, 2002) and the Accreditation Council for Continuing Medical Education (ACCME), all issued specific guidelines regarding interactions between physicians and industry. At the same time, the Office of the Inspector General (OIG) published a guidance document explaining which industry practices were likely to trigger government investigations and which were not. Both physicians and the pharmaceutical industry could be prosecuted equally for practices judged illegal under the anti-kickback statute and the False Claims Act. Apart from this threat of litigation, there are no specific penalties in either the pharmaceutical guidelines or those of the physician organizations. The guidelines vary somewhat by organization, but most concur that (1) gifts should entail a benefit to patients and not be of substantial value, (2) modest meals and social events are acceptable only if they have an educational component, (3) support for medical education should be funneled through independent third parties, and should not be contingent on specific educational content, and (4) faculty reimbursement for educational events should be reasonable, and that non-faculty attendees should not receive any monetary compensation. Even if these guidelines successfully fend off litigation, a number of ethical problems remain. To begin with, the idea that gifts benefit patients is specious. The AMA specifies that gifts such as textbooks and diagnostic equipment are acceptable, though the value should not exceed $100.
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Presumably, pens, post-its, and other office equipment would also fall under this heading. Personal and family use of free drug samples is allowed, as long as such use does not interfere with patient access to the same samples. To allow these gifts while banning acceptance of cash is to pretend that money is not fungible. Relieving physicians of the responsibility to provide stethoscopes and pens does not ‘‘benefit patients.’’ Instead, money not spent on essential equipment goes directly into the doctor’s pocket. The same is true for personal medication samples and meals. The second problem with the guidelines is that the definitions require interpretation. Meals are supposed to be ‘‘modest,’’ but usually occur at expensive restaurants. Moreover, the $100 rule has no frequency attached to it; presumably accepting 20 meals valued at $10 each would not be a violation. Resident physicians may consume thousands of dollars in meals each year. Similarly, one survey conducted in a residency clinic noted that of 53 respondents, only 2 reported taking no samples for personal or family use in the last 12 months, and the total retail value of the samples taken was $10,000 (Westfall, McCabe, & Nicholas, 1997). The third problem is that although pharmaceutical companies may not dictate the contents of the educational events they sponsor, they are by no means obligated to sponsor all educational events. Drug representatives are always in attendance, and the educators rarely teach a single course or seminar. Although never explicitly stated, future funding is somewhat dependent on current content. To this end, companies often maintain speakers’ bureaus of educators and opinion leaders whose lectures showcase a particular product in a favorable light. Speakers who portray the company’s products in a less favorable light may be removed from the bureau or find they have few engagements. Finally, there is the problem of unconscious bias associated with accepting of gifts. Because physicians, with their specialized knowledge, wield greater power than their patients, and because the patients trust physicians to act on their behalf, physicians have an ethical obligation to be unbiased when evaluating any potential therapy. This is impossible to do if the physician is receiving gifts from the maker of that therapy. To claim that the value of the gift involved is too small to sway one’s judgment is to admit that one is a prostitute – we are just haggling over price. Only the ACP acknowledges this point in its position paper (Coyle, 2002). The opening statement reads ‘‘The acceptance of individual gifts, hospitality, trips and subsidies of all typesyis strongly discouraged.’’ The paper also establishes the basis for this statement, citing the social science research around the gift relationship and the fact that even small gifts ‘‘can affect clinical judgment
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and heighten the perception (as well as the reality) of a conflict of interest.’’ The position also discourages the dispensing of sample medications, which ultimately drive up costs, and educational materials, which may appear neutral but are inevitably promotional. Unfortunately, in its final recommendations, the position paper appears to contradict these lofty goals by offering a list of ‘‘generally acceptable industry gifts’’ including pens, calendars, books and modest hospitality, though it does acknowledge that these examples will ‘‘frustrate some readers.’’ In the end, physicians are encouraged to make a good faith effort ‘‘to determine what kinds of amenities are ethically appropriate to accept.’’ Apparently, even the ACP is hesitant to deprive its members of the moral authority to accept perks. The relationship between academics and the pharmaceutical industry is more complex and often the two are inextricably linked, as many researchers depend on drug companies for grant support, and companies rely on researchers to prove their drugs are safe and effective. Academics also serve as paid consultants, sit on advisory boards, and lecture as paid members of companies’ speakers’ bureaus. Although companies occasionally exert overt influence over an academic through agreements that give the company the right to block publication if they do not feel the study was conducted properly (i.e. did not show their product in a favorable light), more often the influence is wielded subtly. Researchers who depend on drug company funds have two reasons to present their results in ways that demonstrate the efficacy of the drug. First, positive studies are more likely to be published than negative ones, further enhancing the researcher’s career. Second, successful studies generate additional research grants. Researchers are also encouraged to disseminate their results through paid speaking engagements at drug company-sponsored symposia, often for continuing medical education credit. Finally, those researchers who are believed to be opinion leaders may be asked to write review articles highlighting the off-label use of certain products. Sometimes these articles are drafted by the company itself, and the author simply allows the use of his name for a fee. This type of ‘‘scholarship’’ allows drug companies to skirt the laws forbidding the advertising of products for non-approved indications. Relationships between researchers and pharmaceutical companies are fraught with danger for research subjects, who could potentially be harmed by the studies they participate in, and patients who later receive treatments based on the results of those same studies. As the cost of drug approvals has increased, pharmaceutical companies are increasingly turning to contract research organizations (CROs) instead of traditional academic institutions. Commercial organizations now boast top research scientists without the
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delays necessitated in getting approval from academic research offices and the institutional review boards, which oversee patient safety concerns. Instead, trial protocols are submitted to for-profit ‘‘independent boards,’’ whose very existence is dependent upon a continuous flow of protocols to review (Morin et al., 2002). While academic medical centers received 80% of all money spent on drug trials in 1991, that figure fell to 40% in 1998, and now stands at 26% (Bodenheimer, 2000; Steinbrook, 2005). With hundreds of CROs now competing for drug company money, the competition with academic medical centers is intense, creating enormous pressure for all players to produce positive results leading to drug licensure. Drug companies have a number of opportunities to influence the outcomes of trials in favor of their product. First, companies often design their own trials. Outside investigators may be brought in to give the appearance of independence, but rarely influence study design. When independent investigators do bring study designs to a company, they are reviewed by the marketing department to see whether the findings of the study might have a negative impact on drug sales. Companies design studies to favor their product. They may compare the product to placebo, instead of to the current standard of care, so as not to run the risk of discovering that their product is inferior. Drugs are often tested on relatively healthy adults in order to demonstrate that the medicines have minimal side effects, even if the intended target of the drugs will be elderly patients with concomitant diseases. When two drugs are compared, the sponsor’s drug may be given at full dose and the competitor’s drug at a low dose to ensure that the sponsor’s drug appears superior (Bodenheimer, 2000). Companies almost always maintain control of the data, sharing only select portions with the independent investigators. This allows them to spin the data in ways that are favorable to their product. In addition, most research contracts contain ‘‘gag clauses’’ that prevent the investigator from publishing the results of the trial without permission from the sponsor. When results do not favor the sponsor, they often suppress publication, claiming that flaws in the study design invalidate the findings. Even when authors succeed in publishing such results, they are often delayed by months or years, allowing the company to reap additional profits before the findings become public. Investigators rarely speak about suppressed trials, either for fear of litigation, or because they require further funding from the same companies. As a result, it is unknown how many negative trials have been suppressed. In addition to designing the studies and controlling the data, manufacturers often have their own professional ghostwriters compose the article for
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publication. Prominent academics with limited involvement may then be added as authors, while the writer’s name does not appear at all among the listed authors (Bodenheimer, 2000). Obviously, all these practices present serious ethical dilemmas for physicians involved in clinical research. Obtaining enough independent funding from the NIH and other sources to maintain a research career may be preferable, but is seldom possible. Because of the danger imposed by these various relationships, a number of organizations have adopted guidelines for the interaction of academics with industry. Because banning such relationships would harm potentially beneficial collaborations between researchers and manufacturers, many of the recommendations have to do with disclosure of any potential conflicts of interest. Although in theory such disclosures should help readers to evaluate the results of a trial, researchers are so intricately intertwined with the manufacturers that the disclosures tend to be disregarded. For example, it is common to have one or more of the lead authors disclose relationships with half a dozen different companies. Sometimes ties are so extensive that they exceed the available print space and need to be published electronically (Angell, 2000). Ascertaining the exact bias under such circumstances can be difficult. Two efforts at reforming the relationship deserve special mention. In 2001, the International Committee of Medical Journal Editors (ICMJE), representing 11 major medical journals, began to require that authors confirm in writing that they accepted full responsibility for the trial design, had access to the data and controlled the decision to publish (Steinbrook, 2005). Unfortunately, in the intervening years, this effort has had little effect on the nature of contracts between researchers and industry (Steinbrook, 2005). Partly this is due to the vague definition of ‘‘access to data.’’ Certainly, some large, successful academic centers have been able to establish their own rules and standardized contracts without gag clauses, but most smaller organizations, who are in direct competition with CROs, have been reluctant to do so. Once again, the federal government appears to be moving to regulate what professionals failed to regulate among themselves. The Fair Access to Clinical Trials Act of 2005, introduced into the Senate this year, would ban contracts that prohibit, limit or delay the dissemination of study findings (Steinbrook, 2005). In 2004, the ICMJE acted again, this time requiring that all future clinical trials beginning July 1, 2005 must be registered with an international trials registry at the initiation of the trial in order to be considered for publication at the end of the trial. In effect, such a requirement should make plain when trial results are suppressed, because the trial will be registered from its
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inception. It will be harder to prove a delay in releasing results, as the publication process can sometimes take years to complete. The effect of the ICMJE statement will not be known for several years, but it represents a step in the right direction. Spurred on by a growing number of scandals in pharmaceutical research, the federal government may choose to take a larger role in the oversight of clinical trials.
SELF-REFERRAL Because a physician’s primary obligation is to his patients’ well-being, it is unethical to allow prospects of financial gain to cloud one’s judgment. When physicians participate in ownership of medical facilities, laboratories, or equipment, there are ethical as well as legal concerns that such interests will lead to inappropriate or unnecessary referrals, since prospective payment constitutes a form of kickback. Ethical problems with self-referral are not unique to medicine. In many professions, clients can be induced to purchase services or products that they do not need, though rarely outside of medicine can such inducements result in physical harm to the client. Also, unnecessary services in other professions are limited by cost, whereas in medicine, patients with insurance rarely consider cost, and physicians rarely consider patients without insurance. Self-referral can take on several forms. The most problematic and obvious of these occurs when physicians own outside facilities or equipment. Prohibitions against this sort of arrangement are clear. The ACP position paper states ‘‘It is unethical for physicians to over-utilize resources or make unnecessary referrals to goods and services for their own financial benefit’’ or ‘‘to participate in any arrangement that links income generation explicitly or implicitly to equipment or facility usage or revenues generated by investorphysicians.’’ While the second part of this statement is easy to interpret, most physicians have a very narrow reading of the first part. Indeed, the authors of the statement likely intended a narrow reading. At the same time, a broader reading would call into ethical question much of how medicine is practiced today. Although few physicians own outside facilities, decisions about what tests or procedures to perform lie almost exclusively with the physicians who will perform them. Studies of regional variation in healthcare utilization demonstrate that levels of usage are determined not by disease severity or patient preference, but by local supply (Fisher et al., 2000). As supply increases in a given area, demand rises to meet it. This phenomenon occurs on two levels.
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On an individual level, physicians order tests and procedures that they feel most comfortable with. For example, in screening for colon cancer, gastroenterologists are most likely to favor colonoscopy, which they perform, whereas radiologists may prefer barium enema or, more recently, virtual colonoscopy. This preference stems partly from the belief that their test is the most effective, safest, or most comfortable, but we must confront the uncomfortable fact that gastroenterologists earn a significant portion of their income by performing endoscopies, while radiologists earn their living by performing radiologic examinations. If an invasive cardiologist moves into the community, the probability that a patient with chest pain will undergo cardiac catheterization increases. If that same patient is referred to a non-invasive cardiologist, he will more likely get a stress test (which the noninvasive cardiologist will read for a fee). This sort of self-referral has, for the most part, passed unnoticed by the professional ethics committees, although third party payers are increasingly interested in these sorts of local variation. The same conflict appears at the level of medical specialties and their corresponding societies in issuing professional guidelines for the diagnosis and treatment of various diseases. By producing official practice guidelines, societies often set the standard of care for others to follow, under the threat of malpractice litigation for failing to comply with the guideline. Thus, guidelines issued by a particular specialty can be a rich source of referrals to that same specialty. One example is prostate cancer screening. There is considerable debate as to whether screening should take place at all, both because the screening blood test (the PSA test) is poor at discriminating between cancer and benign prostatic hypertrophy, and because it is not known whether early intervention with surgery, which has considerable side effects, will have any measurable influence on outcomes. As a result, neither the US Preventative Services Task Force – a governmental body that assesses screening technologies and makes recommendations – the American College of Physicians, the American Society of Internal Medicine, the National Cancer Institute, the Centers for Disease Control and Prevention, the American Academy of Family Physicians, nor American College of Preventive Medicine advocates routine PSA testing. The American Urologic Association alone recommends routine screening for all men over age 50. Obviously, urologists have the most to gain financially from prostate cancer screening. Screening inevitably leads to biopsies, prostatectomies, and hormone therapy, all administered by urologists. This does not mean that the urologists are acting purely in the name of self-interest or greed. Most urologists believe that screening saves lives. Indeed, prostate cancer is a leading cause of cancer morbidity and death among men. The other
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aforementioned groups, however, unlike the urologists, reserve judgment until data are available. This difference might be attributable to the fact that urologists have more experience with prostate cancer, but it seems more likely that they are responding to a subconscious self-serving bias. The urologists’ recommendation has had substantial impact. At present, 75% of American men over 50 have undergone PSA testing, compared to only 63% who have participated in colon cancer screening, even though colon cancer screening has been proven to be effective in decreasing mortality, and the morbidity is far less (Sirovich, Schwartz, & Woloshin, 2003). Recommendations favoring colon cancer screening by an array of professional organizations are unanimous. Such biases are not limited to urology, but are ubiquitous in medicine. Endocrinologists advocate for diabetes screening, cardiologists for coronary artery disease screening, and many radiologists see legitimate uses for total body CT scans. After all, people enter particular specialties because they believe the work they are doing is important and that the therapies are effective. One potential solution to this problem would be to separate diagnostic physicians, who order the tests and procedures, from therapeutic physicians, who perform them, but such a solution would require a major restructuring of medical practice. In the meantime, the ethical physician must critically examine each test and procedure and ask whether the patient will really benefit from it.
MANAGED CARE The third conflict in medicine pits the physician against the insurance company. Whether a traditional insurer or an HMO, the goals of insurance companies often conflict with the goals of the patients they are meant to serve. For example, for-profit insurers focus on reducing the ‘‘medical loss ratio’’ or the percentage of premiums which is spent on actual medical care as opposed to administrative expenses, marketing, etc. Insurance companies attempt to decrease costs and limit services, while patients often believe that more care is better. Fee-for-service doctors, who profit by providing more care, have little incentive to convince patients that tests or procedures may not be in their best interest. Discouraging patients from medical treatment is often time-consuming and rarely reimbursed. Doctors who put their patients best interests ahead of all else will engage in such discussions, but they pay a financial price, and the patients may not appreciate it. Instead, a patient may suspect that the doctor is in league with the insurer and is obstructing necessary but expensive care. Such conflicts are destructive to the doctor–patient
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relationship, and so they rarely occur. This perverse incentive is partly to blame for the rapidly escalating healthcare costs in the US, as more doctors strive to perform more procedures on more patients. As I mentioned previously, the move toward capitation, in which physicians assume financial risk for their patients’ health, has largely dissipated, leaving two models of care: the traditional fee-for-service model, in which individual physicians are reimbursed for the specific care they provide, and salary models, in which physicians are either employed directly by the health plan or work for groups or institutions which, in turn, bill the health care companies fee-for-service. Whereas in the past many physicians opted for salaried positions, sacrificing income for security, the current realities of the marketplace are such that most jobs now have at least some variable compensation tied to productivity goals. In medicine, productivity means seeing more patients in the same period of time. To a small extent this can be achieved through work efficiency, but more often it comes at the expense of patient care. If patients feel that their doctors are always rushing, that their time is limited, and that there is little opportunity for questions and discussion, that is because doctors are increasingly pressured by the system, which reimburses for patients, not time, and does not allow doctors to charge different fees depending on patients’ ability (or willingness) to pay. In salary models, the incentives are reversed. Because seeing more patients will increase work stress without increasing compensation, physicians resist additional work. In such systems, doctors are often slow to perform the same procedures that they rush to perform when paid fee-for-service. Primary care physicians will attempt to refer patients to specialists, and the specialists will resist those referrals. In fee-for-service models, the specialists may feel that generalists provide inferior care for diseases in their specialty, but the opposite is true in salary systems: specialists feel that with a little training, the generalists are competent to handle a range of common problems. The newest incentive programs are often referred to as pay-for-performance (PFP). PFP models set specific quality targets, offering additional payments to physicians if they achieve these metrics. Goals are typically set as a percentile of national practice, so the target should move from year to year as practice improves. While on the surface such initiatives appear beneficial for all involved – who could object to paying more for better quality? – The inherent difficulties in measuring quality medical care introduce significant obstacles to achieving the stated aims. Measurements tend to focus on administrative data which are objective, inexpensive to collect, and may be linked to commonly accepted guidelines. Unfortunately, current measures
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are a poor proxy for real physician quality. For example, one common quality measure in primary care is mammography rate among women aged 52–69. A typical incentive plan would offer $0.50 or $1 per member per month if physicians exceed the target threshold (e.g. 85%). For a physician with 3,000 patients in his practice, this is a significant incentive program. Whether patients actually get mammography involves a number of steps, many of them administrative, which are only loosely connected with the quality of care provided by an individual physician. There are few physicians who either disagree with or are unaware of the recommendation to perform annual mammography on women in this age group. Some reasons for not complying with the guideline in an individual instance include: patient preference, no contact in the past year, not making time during a visit in which other, more pressing concerns were discussed, forgetting to order the test, and the patient failing to keep the testing appointment. There are probably many other legitimate reasons for not ordering a mammogram every year. While some of these, such as forgetting to order the test, could be considered poor quality of care, honoring a patient’s preference – assuming it is an informed preference – should be considered good quality care. Unfortunately, administrative data cannot distinguish among any of these reasons. Because administrative benchmarks contain a one-size-fits-all approach to medicine, they encourage doctors not to respect their patients’ wishes, but to push for compliance with guidelines. Eliciting patient preferences, which is time consuming and difficult, is likely to be discarded if the outcome of such discussions may lead to non-compliance. Furthermore, patients who are unable or unwilling to comply with recommended screening or treatment reflect badly on their doctors, and may find they are unwelcome if too much of the reimbursement depends on meeting certain PFP goals. The other problem with PFP incentives is that they focus medical resources on particular interventions that may not be very important for patient health. Compared to screening for high blood pressure, routine screening mammography has a modest benefit. Blood pressure screening is much harder to document with administrative databases, though that could change with better electronic medical record systems. To date, health plans do not rate doctors on identifying or treating hypertension. If doctors want excellent rates of mammography, they will have to devote time and resources toward incorporating mammography discussions into visits, reminder systems to alert patients when they are due, and follow-up systems to be sure that patients complete all ordered tests. Such diversion of limited resources will not benefit most patients. Doctors must then decide whether they will practice in order to maximize revenue and appear to provide good
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quality care, or to actually provide good quality care. With a preponderance of guidelines now being issued by every conceivable organization, doctors must make this decision on a daily basis.
CARING FOR THE UNINSURED The final challenge facing physicians is the growing ranks of uninsured and underinsured patients who seek their services. In the past, many physicians provided free care to the needy, subsidized by fees from wealthier patients. Although indigent care still exists, the fact that most physicians are reimbursed by insurance companies in highly competitive contracts leaves little over to devote time to free care. It is estimated that in 2003 there were 45 million Americans without health insurance (U.S. Census Bureau, 2004). Some receive free care provided mostly by hospitals and hospital-owned clinics, usually as part of residency training programs. In rural areas and other places without access to clinics providing free care, medical treatment is likely to be sporadic, with patients waiting until conditions become severe before seeking help. Moreover, specialty care is usually not covered, so that patients may not be able to see an orthopedist, ophthalmologist or cardiologist outside of the hospital. The AMA’s principles of medical ethics contain two provisions which appear to protect the physician’s economic interest: (1) ‘‘A physician shall, in the provision of appropriate patient care, except in emergencies, be free to choose whom to servey’’ and (2) ‘‘A physician shall support access to medical care for all people.’’ The first provides the ethical basis for refusing care to the uninsured, while the second encourages third party payment to support paid care for all people. In addition to the uninsured, there are a growing number of underinsured patients. Underinsured patients are those who, despite having insurance, cannot afford the care they need. This segment includes both indigent patients insured by Medicaid (a federal program administered by the states and the largest health insurer in the US), and patients with traditional indemnity plans with high deductibles and other out-of-pocket expenses. Because Medicaid reimburses poorly, many physicians refuse to accept it as payment (Iglehart, 1999b). Those who do may churn quickly through the patients in order to maximize profits. These so-called ‘‘Medicaid mills’’ are the only alternative in some areas. Specialty care for Medicaid patients is similarly limited by the lack of providers accepting the meager coverage. On the other hand, most states cover medications, diagnostic testing, mental
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health care, and hospitalizations at minimal cost to the patient. The underinsured working poor may have even more trouble than Medicaid patients in obtaining the care they need. Plans with high deductibles and copays are the fastest growing segment of the insurance industry. Employers like them as a means to keep premiums low, and employees may choose them for the same reason, as long as they stay healthy. Unfortunately, if illness strikes, the financial burden is shifted to the patient, who may be unable to pay. High copays and deductibles can affect all areas of patient care, from doctor’s visits to medications and even hospitalization. In the case of both uninsured and underinsured patients, physicians must decide whether they will provide care to the poor without being properly reimbursed. On the one hand, doctors may feel a sense of duty to their patients, even if they can no longer pay, and to all in need of their services, while on the other hand, time spent caring for the indigent represents lost income. With insurance penetration almost universal among paying patients, doctors do not have the ability to raise fees for wealthy patients in order to offset the cost of caring for those who are unable to pay. In addition, failing to collect copays from underinsured patients lowers physician income and can constitute insurance fraud, unless the physician has a written policy, and patients provide documentation of financial hardship. This issue is particularly difficult when a patient has seen a doctor for many years and has an established relationship. If the patient loses his job – and his insurance – there is little the doctor can do. Although individual exceptions can sometimes be made, more often this is not possible. For example, a physician must choose whether or not to accept Medicaid (or any other insurer). Accepting insurance payments for specific patients is not allowed. Even if a physician wanted to accommodate one of his patients, he may not be able to afford the loss of income associated with becoming a Medicaid provider, especially in an area with few such providers. Physicians face another dilemma for patients who are unable to afford medications. As discussed above, through their frequent contact with pharmaceutical representatives, physicians often have large quantities of sample medications and are free to dispense these to patients who cannot afford them. Indeed, one allergist noted that his joint practice with a nurse practitioner dispensed over $200,000 annually in free samples (Wolf, 1998). However, dispensing samples is a two-edged sword. For patients with insurance, dispensing free samples could represent an unfair inducement to stay with that physician, and could be considered a sort of kickback to the patient. Monthly visits whose primary purpose is to receive free samples may generate inappropriate revenue for the physician. It is also important to
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consider the effects of free samples on prescribing patterns. Physicians who keep free samples of certain medications will be more likely to prescribe those medications. Because samples are meant to induce physician prescriptions, pharmaceutical companies only provide samples of expensive medications. Use of samples for the indigent may result in more expensive (but no more effective) therapies being used for paying patients as well. In addition, most patients do not remain permanently uninsured, but move in and out of insured status. Uninsured patients who become accustomed to taking a particular expensive medication may be stuck with high copays for that same medicine when the do get insurance. Physicians today face a number of ethical challenges in caring for patients while being paid by third parties. Although physicians have a fiduciary duty to put the patient’s interests above all else, competing financial incentives built into the medical-industrial complex threaten to undermine physician judgment by introducing an unconscious, self-serving bias into an otherwise selfless relationship. The insidious nature of such incentives, whether they come from insurers, pharmaceutical companies or the physicians themselves, in conjunction with the human tendency to rationalize behaviors which serve our own interests, makes these conflicts difficult to recognize and even harder to resolve. Given the large amounts of money involved in all these relationships, and the future potential for even greater profits, regulation is unlikely to come from physicians themselves, except under threat of litigation or by legislation. To act in a strictly ethical manner requires all physicians to critically examine their relationships with various sources of income, both cash and non-cash, and to divorce themselves to every extent possible from those relationships which could adversely affect the care of individual patients and the population as a whole. To this end, professional organizations and government need to recognize these conflicts and to promote ethical standards far stricter than those in force today. Without such external controls, it is likely that the conflicts will continue, or even expand, in the coming decades.
REFERENCES Alonso-Zaldivar, R. (2005). Shifting medical costs: High deductibles coming back. More workers opting for lower premiums, Los Angeles Times, (May), Los Angeles, CA. Angell, M. (2000). Is academic medicine for sale? New England Journal of Medicine, 342(20), 1516–1518. Baker, C. A. (2004). Cost sharing in medical insurance plans. Washington, DC: US Department of Labor, Bureau of Labor Statistics.
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Blumenthal, D. (2004). Doctors and drug companies. New England Journal of Medicine, 351(18), 1885–1890. Bodenheimer, T. (2000). Uneasy alliance–clinical investigators and the pharmaceutical industry. New England Journal of Medicine, 342(20), 1539–1544. Chren, M. M., & Landefeld, C. S. (1994). Physicians’ behavior and their interactions with drug companies. A controlled study of physicians who requested additions to a hospital drug formulary. JAMA, 271(9), 684–689. Coyle, S. L. (2002). Physician–Industry relations. Part 1: Individual physicians. Annals of Internal Medicine, 136(5), 396–402. Dana, J., & Loewenstein, G. (2003). A social science perspective on gifts to physicians from industry. JAMA, 290(2), 252–255. Ferguson, R. P., Rhim, E., Belizaire, W., Egede, L., Carter, K., & Lansdale, T. (1999). Encounters with pharmaceutical sales representatives among practicing internists. American Journal of Medicine, 107(2), 149–152. Fisher, E. S., Wennberg, J. E., Stukel, T. A., Skinner, J. S., Sharp, S. M., Freeman, J. L., & Gittelsohn, A. M. (2000). Associations among hospital capacity, utilization, and mortality of US Medicare beneficiaries, controlling for sociodemographic factors. Health Service Journal, 34(6), 1351–1362. Harris, G., & Berenson, A. (2005). 10 Voters on panel backing pain pills had industry ties, New York Times. New York. p. 1. Iglehart, J. K. (1999). The American health care system – Medicare. New England Journal of Medicine, 340(4), 327–332. Iglehart, J. K. (1999). The American health care system–Medicaid. New England Journal of Medicine, 340(5), 403–408. Kao, A. C., Zaslavsky, A. M., Green, D. C., Koplan, J. P., & Cleary, P. D. (2001). Physician incentives and disclosure of payment methods to patients. Journal of General Internal Medicine, 16(3), 181–188. Kuttner, R. (1998). Must good HMOs go bad? First of two parts: The commercialization of prepaid group health care. New England Journal of Medicine, 338(21), 1558–1563. Kuttner, R. (1999). The American health care system – employer-sponsored health coverage. New England Journal of Medicine, 340(3), 248–252. Mechanic, D., & Schlesinger, M. (1996). The impact of managed care on patients’ trust in medical care and their physicians. JAMA, 275(21), 1693–1697. Morin, K., Rakatansky, H., Riddick, F. A., Jr., Morse, L. J., O’Bannon, J. M., 3rd, Goldrich, M. S., Ray, P., Weiss, M., Sade, R. M., & Spillman, M. A. (2002). Managing conflicts of interest in the conduct of clinical trials. JAMA, 287(1), 78–84. Pereira, A. G., & Pearson, S. D. (2001). Patient attitudes toward physician financial incentives. Archives of Internal Medicine, 161(10), 1313–1317. Sirovich, B. E., Schwartz, L. M., & Woloshin, S. (2003). Screening men for prostate and colorectal cancer in the United States: Does practice reflect the evidence? JAMA, 289(11), 1414–1420. Steinbrook, R. (2005). Gag clauses in clinical-trial agreements. New England Journal of Medicine, 352(21), 2160–2162. Steinman, M. A., Shlipak, M. G., & McPhee, S. J. (2001). Of principles and pens: Attitudes and practices of medicine housestaff toward pharmaceutical industry promotions. American Journal of Medicine, 110(7), 551–557.
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Studdert, D. M., Mello, M. M., & Brennan, T. A. (2004). Financial conflicts of interest in physicians’ relationships with the pharmaceutical industry – self-regulation in the shadow of federal prosecution. New England Journal of Medicine, 351(18), 1891–1900. US Census Bureau. (2004). Income, poverty, and health insurance coverage in the United States: 2003. Washington, DC. Wazana, A. (2000). Physicians and the pharmaceutical industry: Is a gift ever just a gift? JAMA, 283(3), 373–380. Westfall, J. M., McCabe, J., & Nicholas, R. A. (1997). Personal use of drug samples by physicians and office staff. JAMA, 278(2), 141–143. Wolf, B. L. (1998). Drug samples: Benefit or bait? JAMA, 279(21), 1698–1699.
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THE HISTORY AND ROLE OF THE INSURANCE PROFESSIONAL Ron Duska ABSTRACT This paper details the history of the movement, which attempted to turn the occupation of life insurance salesman into an insurance professional. It will relate the criteria for professionalism spelled out by Solomon Huebner and attempt to spell out the ethical obligations such professionalism demands. Using some case studies, the paper will examine some common difficulties faced by insurance professionals. The paper concludes by examining the development of the insurance sales professional into the financial planner and adviser and projects some of the ethical requirements entailed by this future direction.
The insurance professional!!! If the concept of a professional implies behaving ethically, anyone familiar with the Gallup Poll rankings of the honesty and ethical standards of people in different fields, might scoff at the notion of an insurance professional. The American people have ranked insurance salesmen third from the bottom for honesty and ethics for the past 20 years. The only groups lower are advertisers and car salesmen.1 Nevertheless, in spite of this perception of the American public, forces within the insurance industry itself have attempted to improve the ethical
Crisis and Opportunity in the Professions Research in Ethical Issues in Organizations, Volume 6, 43–66 r Published by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 1529-2096/doi:10.1016/S1529-2096(05)06003-7
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practices of those selling insurance for over a century. It has done this in no small way by self-consciously adopting the notion of a profession. Part of this paper will detail the history of that movement and then attempt to spell out the obligations such professionalism demands. The paper will conclude by examining the development of the insurance sales professional into the financial planner and adviser and project some possible directions in the future.
HISTORICAL BACKGROUND Unlike the professions of teaching, law and medicine, which have been around for centuries, the profession of insurance agent (which is rapidly evolving into the profession of financial services provider) is a relatively recent phenomena developing after the rise of modern day insurance. Insurance of one form or another, as a method of assuring security and fiscal well-being, has been around since prehistoric times. The first recorded instances of something resembling modern-day insurance, which is essentially risk management, are found in China, Egypt and Babylonia. One example is Chinese merchants who feared losing an entire vessel and its cargo when trading on the Yangtze River. They split the total cargo among many vessels to spread the risk of loss among all merchants so that no one merchant would be devastated. In this early version of risk management, the benefits of more trade and greater profits outweighed the extra costs of such inefficiency. In Egypt, in the days of the Pharaohs, burial societies were created to provide funds for embalming and entombment, which were believed to be necessary conditions for a happy afterlife. In Babylonia owners of vessels sought loans to underwrite their ventures. In exchange for a substantial share of the profits, moneylenders agreed to cancel the loan if the vessel or cargo were lost. ‘‘Such lending contracts on vessels were called bottomry bonds, and on cargo, respondentia bonds.’’2 In all these cases, we see the essential risk management element of insurance – spreading the devastating costs of losses. Insurance in some primitive form or other continued through the middle ages until insurance companies began to appear in Continental Europe and America in the 18th century. Lloyd’s of London was established in England and in 1759 the Presbyterian Ministers’ Fund formed the first life insurance company in America. Since early attitudes toward life insurance generally held that it was immoral, because it indicated a lack of faith in
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providence – even to the point that life insurance was illegal in Massachusetts as late as 1809 – the Presbyterian Minister’s Fund needed a moral justification for the sale of insurance. Given such moral disapprobation, it is not surprising that insurance sales were small business. According to Richard Rudolph, ‘‘At the beginning of the 19th century, the entire life insurance in forceyconsisted ofy160 policies.’’3
THE SELLING OF INSURANCE AND THE RISE OF AGENTS While insurance of one form or another existed for centuries, the active selling of insurance by agents is a relatively recent phenomenon. Until the mid-19th century most insurance was bought at exchanges such as Lloyd’s of London. In America, an agency system, where individual agents went out to sell insurance started in 1830 when the New York Life Insurance and Trust company began to employ agents. In 1869, the earliest recorded organization of life insurance agents in America occurred in Chicago.4 In 1890 the first meeting of what would become The National Association of Life Underwriters (NALU) was held in Boston. This association was the wellspring of what would be the professional movement in insurance in the United States. From the outset it had an ethical focus. It appealed to those ‘‘who have the business at heart and a proper regard for honorable methods.’’ ‘‘It has called the scrubs to the rear, and tolerates only those who love their work and bring to it their best endeavor and ability.’’5 In the first decade of the twentieth century such groups as NALU began concerted efforts ‘‘to require licensing and education to avoid harm by thoseywho neither educate a prospect nor create an applicant.’’ In 1905–1906, because of massive scandals in the industry, the Armstrong commission was appointed by the New York State legislature ‘‘to investigate the business of life insurance.’’6 While the regulations coming from the investigation helped bring maverick agents into line, the publicity hurt the overall reputation of insurance, which industry associations like NALU tried to correct by insisting on appropriate behavior. ‘‘It was then that the agent stepped in for the recognition which was due him as a representative of the policyholder, as well as the company.’’7 According to Jack Bobo, columnist for the National Underwriter. Life and Health:
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Reform was in the air. In 1911 at the annual NALU convention, the association passed a resolution that recognized, ‘‘The obligation to put the larger interests of the life insurance business above any personal or company interest’’ and the consequent need to eliminate ‘‘all prejudicial and unfair competition.’’ This ethical attitude bore fruit in a Chart of Ethics, one of the first of its kind in America, which was adopted in 1918. This was in effect the practical beginning of the recognition that the agent had a responsibility to the policyholder and was an agent of the company. These men gathering together were forming the profession of insurance agent in the United States. ‘‘Associations were instrumental in securing the enactment of wise and moderate laws which allowed life insurance to reestablish itself in public confidence.’’9 Further, at this time, the need for ‘‘educated’’ agents became a serious concern. In 1913 NALU instituted educational programs for agents encouraging various universities such as New York University, the University of Denver, the Wharton school at the University of Pennsylvania and the Carnegie Institute of Technology. In 1915 the first edition of Dr. Solomon Huebner’s Life Insurance, a text commissioned by NALU, appeared in print. Simultaneously, Huebner introduced the study of risk management and insurance into the curriculum of the Wharton School at the University of Pennsylvania. In January of 1927 NALU approved the creation of the American College of Life Underwriters, today known simply as The American College. It was headquartered at the University of Pennsylvania and its first president was Edward Woods with Dr. Huebner as its dean. The basic purpose NALU had for encouraging the founding of the American College was to educate the life insurance salesperson and to help develop life insurance sales into a profession. The college since its inception has educated thousands of insurance professionals and has been committed to fulfilling Huebner’s lifetime dream – turning life insurance salesmen into professionals.
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HUEBNER’S VIEW OF PROFESSIONALISM IN INSURANCE But what did Huebner think constitutes a professional? In 1915, he delivered an address before the Annual meetings of Baltimore Life and New Your Life Underwriters, which urged the professionalization of insurance sales. Using physicians, lawyers, teachers and others as models of what professionals should be, Huebner crafted as fine a statement of what it takes to be a professional as exists, a view which is, I would argue, as valid today as in 1915. He cited four characteristics of the professional. 1. ‘‘The professional is involved in a vocation useful and noble enough to inspire love and enthusiasm on the part of the practitioner.’’ 2. ‘‘The professional’s vocation in its practice requires an expert’s knowledge.’’ 3. ‘‘In applying that knowledge the practitioner should abandon the strictly selfish commercial view and ever keep in mind the advantage of the client.’’ 4. ‘‘The practitioner should possess a spirit of loyalty to fellow practitioners, of helpfulness to the common cause they all profess, and should not allow any unprofessional acts to bring shame upon the entire profession.’’10 Let’s analyze these four characteristics. Utility and Nobility It is evident that financial planners are useful, and the fact that financial planning helps people alleviate anxiety and gain security makes it a noble vocation. In fact many insurance agents see their role as a vocation. It is generally agreed that quite often life insurance is a product that needs to be sold. Purchasing life insurance is an altruistic act that concerns itself with others, and at times it needs to be suggested, and encouragedyin short sold. Since people do not usually volunteer to give up parts of their incomes, and often do not see the need for life insurance, it is up to the insurance professional to educate and persuade people, that for the good of others – their family, spouses, significant others or even successors in business – they need to put some instrument in place that will guarantee those others financial security in case of the insured’s premature death. The gratitude of individuals, who have lost a spouse, to the salesperson, who persuaded them to purchase a policy that now guarantees them financial
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security, is an indicator of the nobility of the profession. The gratitude of those who have purchased an annuity or long-term care policy that guarantees freedom from financial worry in old age bespeaks the worth of the products that are sold by insurance agents. In short, by selling their product, insurance agents do useful and noble work.
Expertise According to Huebner, the second characteristic of a professional is possessing expert knowledge. A professional such as a doctor or lawyer, brings to the table, knowledge that the client does not have. The true professional needs to be competent, so it is a responsibility of the true professional to stay abreast of the latest developments, learning not only what are latest beneficial practices, but also understanding why they are beneficial. Financial services is a complicated area requiring study to become a competent expert, who stays abreast of the latest developments and not only learns what the latest beneficial products are, but also understands why they are beneficial. Since, however, this expertise implies an asymmetry of knowledge about the products being recommended or sold, a special obligation is placed on the professional to put the best interest of the client ahead of the interest of the professional in dealing with those products. That leads to a third requirement of the professional – abandoning the strictly commercial point of view.
Abandoning the Strictly Commercial Point of View This is possibly the most interesting characteristic of the professional cited by Huebner, for it lays out an ethical prescription. It requires the professional ‘‘to abandon the strictly selfish commercial view and ever keep in mind the advantage of the client.’’ It requires that in a situation where the insurance advisers interest and the client’s interests conflict, the professional must surrender his or her interest to that of the client. By the ‘‘strictly selfish commercial view’’ Huebner has in mind the view of those for whom the only concern of business is making money or increasing profit. It is a view voiced by extreme advocates of the free market system who insist, ‘‘The primary and only responsibility of business is to increase profit.’’ Such a view is inevitably a ‘‘selfish’’ point of view.
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It is a distortion of the position of Adam Smith, the 18th century economist-philosopher, who in his book The Wealth of Nations, argued that a great deal of good comes from a system that allows people to pursue their own interests. This well-known appeal to the beneficial results of an invisible hand became the theoretical foundation and justification of the capitalist free-market economic system. However, it is important to note that, Smith insisted that the pursuit of self-interest be constrained by ethical considerations of justice and fairness. It should be enlightened self-interest. One may not always look out for one’s interest. There are times when it is ethically necessary to constrain self-interest in the name of justice or fairness and look out for the interests of others. The ‘‘strictly selfish commercial’’ view, contrary to the enlightened view, encourages the pursuit of self-interest with no limits – a pursuit that inevitably leads to selfishness. The English language uses two different words, self-interest and selfishness, to distinguish between behavior that is perfectly acceptable (self-interested behavior), and behavior that is ethically inappropriate (selfish behavior). The New Testament wisely prescribes that we love our neighbor as ourselves, thereby reminding us that self-interest is a healthy thing, and if we do not have a healthy self-love and self-interest, we do both our neighbors and ourselves a disservice. Nevertheless, there are times when pursing self-interest at the expense of another, is to act selfishly, and selfish behavior is unethical behavior. In fact, it is precisely to counter the unethical selfish attitude that we teach children to share. Since no one person is entitled to everything, there will be times that ethics require people to sacrifice their own interests for the common good – to abandon the ‘‘strictly selfish commercial view.’’
Loyalty to Fellow Practitioners The fourth and final criterion of professionalism that Huebner cites is the requirement that the practitioner ‘‘possess a spirit of loyalty to fellow practitioners, of helpfulness to the common cause they all profess, and should not allow any unprofessional acts to bring shame upon the entire profession.’’ In short there should be dedication to the goals of a moral community established to serve clients in an ethical way, and a resolve to police the profession in such a way that unprofessional behavior is condemned. Thus the financial services profession ought to have associations such as the American Bar Association (ABA), the American Medical Association (AMA), or the American Institute of Certified Public Accountants (AICPA), which will help
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in the self-regulation of their members. NALU now National Association of Insurance and Financial Advisers (NAIFA) and The Society of Financial Services Professionals would have the responsibility to police its members. On the basis of Huebner’s characteristics, we can say that a profession has developed in the insurance industry and that it follows the lead set out by Solomon Huebner. But that profession has evolved and expanded recently. We turn now to an investigation of the changing nature of the financial services professional.
THE DEVELOPMENT AND EVOLUTION OF THE PROFESSION The number of insurance agents has dropped dramatically in the last several years, almost 25 percent from 1991.11 The marketing and distribution systems have radically changed. The captive agents have given way to insurance brokers and independent broker groups, and the insurance agent has morphed into the financial planner who because of things like the sale of annuities has become a securities dealer or financial adviser. Selling securities carries a whole new set of fiduciary responsibilities. One needs to register with the Securities and Exchange Commission (SEC) and live up to the guidelines of the National Association of Securities Dealers (NASD). At one time, insurance companies sold insurance, brokerage houses sold securities and banks did banking business. But since the passage of the Gramm-Leach-Bliley Act,12 banks and investment companies have gotten into the insurance sales business. Insurance agents are now securities brokers, securities firms now sell insurance and insurance companies now run banks. The days of going to a broker for securities, and bank for loans and an insurance agent for insurance are over. More and more insurance agents have securities licenses. There are very few people left who would describe themselves as simply insurance professionals. They are now financial planners or such. For example the Society of Financial Services Professionals was originally called the Society of Chartered Life Underwriter (CLU), and started roughly at the time the American College (then known as the American College of Chartered Life Underwriters) gave out its first CLU designations. In the late 1990s, facing the fact that the face of the insurance industry was changing and that its distribution force was becoming more and more involved in financial planning and estate planning and selling other financial products,
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the Society dropped the CLU in its name and now called itself the Society of Financial Services Professionals. The insurance agent was now taking on the tasks of a financial planner and adviser. Providing insurance was no longer sufficient to help clients manage their financial risk. Investments, annuities, provisions for longer life, reverse mortgages, charitable giving, and other considerations were now to be explained and sold. The Certified Financial Planners (CFP) was the new person on the block, and the CFP was becoming the dominant designation in financial planning and advising. A short summary of what factors lead to such change might be helpful. How did the field change so much? The history of the American economy provides an answer. For many years following the Second World War, the American economy experienced productivity-driven growth. Inflation and interest rates were both low and stable, encouraging individuals to save. Traditional whole life insurance products with set premiums and guaranteed cash values fit well into this system and answered the needs of many consumers. The stable economy enabled insurers to surpass published dividend scales. As a result, public confidence in the industry remained high. Term insurance represented the one basic alternative to the traditional whole life product. The era was marked by a stable product line with stable product performance against the backdrop of a stable economy. During the 1970s and early 1980s, the stable picture of the American economy began to change. Productivity growth stagnated. Demographically, the economy was faced with a huge influx of inexperienced baby boom workers. Foreign cartels were formed aiming to control the price of oil and other natural resources. Shockwaves reverberated through the world monetary system while inflation and interest rates soared. Tempted by the high rates of the newly popular money market funds and other financial instruments, consumers borrowed against their policies. The insurance industry began to experience a massive disinter mediation of funds. In response, the industry developed universal life products that reflected the high interest rate yields offered by short- to intermediate-term investments. Premiums were no longer standardized at set levels. Guarantees were lessened. Sales techniques also changed. Advances in technology facilitated the use of customized proposals. Policies were often sold on the basis of illustrations rather than needs. Clients often made judgments based not on guaranteed values, but on illustrated projections reflecting the then high interest rate environment. Customers liked the new products but often were not familiar with their operation. Nor were they always cognizant of the impact of the economy on the products. When interest rates dropped so did product performance. Many universal life policyholders were caught unaware when
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premium notices arrived indicating the need for additional cash infusions to keep policies in force. Public approval ratings of the insurance industry began to plummet and dropped further as the decade of the 1990s opened with a recession and a solvency crisis within the industry. Other factors outside the industry also impacted the public’s perception. The current marketplace is clearly different from the marketplace of 20 years or even 10 years ago. Not only have financial products changed in response to a changing economy, but consumer awareness, attitudes and expectations have also changed. Advances in technology have also served to raise the expectations of consumers regarding the type of information to be provided as part of the sales process. Consumers of financial instruments are used to bank ATM statements as well as quick market quotes from their stockbrokers. In the insurance and money market fields, the demand for greater technology has driven in part the wide use of computerized illustrations of expected return on investment and on a faster-than-ever turnaround basis. Today, financial service instruments are bought and sold on the Internet, leading companies to develop entirely new marketing and delivery systems. The functions of the agent from the traditional distribution system of advising, selling and servicing are being unpacked and given to different people. Advise and products are being blended together and ‘‘one stop shopping’’ for financial plans products and services are being provided by multi-disciplinary firms which will offer financial, tax, legal and accounting advice. The financial services professional driven by the ever complex marketplace can no longer be all things to all clients and adequately fulfill his or her responsibility to provide ‘‘competent’’ service. Besides the changes in the economy and technology, profound changes in demographics have occurred in the last half of the 20th century. The American population is living longer. This creates new concerns about how to manage risk. The problem is now not so much premature death, a factor that makes life insurance necessary, but outliving the source of income, a factor that makes wise investment for retirement years a major concern. Studies have shown that even relatively prosperous members of the baby boom generation have expressed fears about living too long, thereby outliving their source of income. It is not accidental that the biggest portion of business done by life insurance companies is now in annuities and not in life insurance. The shift toward an older population meant that financial service professionals began to look at their clients financial and estate plans. Life insurance can find a significant role in supplementing retirement needs whether this entails the
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use of cash values during life or use of benefits by a survivor following death. But other instruments became necessary and popular. Annuities provide income in old age. Disability and long-term care protection represent an increasing part of the package of the needs clients are likely to have. These are all insurance-based products that offered financial services professionals the opportunity to cross sell and increasingly turn one-purchase consumers into lifelong clients. But beyond those insurancebased products there was increased need for other products such as mutual funds and stock investments used to fund 401K plans or other retirement vehicles. This meant that the insurance professional, besides becoming a retirement and estate planner was also beginning to deal in the sales and marketing of securities which meant the professional would need to become a registered representative and come under the regulations and ethical guidelines of the National Association of Securities Dealers and the SEC – a brave new world for the insurance professional. These latter factors have served to change the legal environment in which financial services professionals do business. There is the blurring of lines between the sectors of the financial services industry. Traditionally, one set of rules has applied to the securities industry and another set of rules to the insurance industry. With the entry of variable products into the insurance portfolio, this distinction became blurred. Insurance agents must obtain securities licensing if they wish to sell variable products. Consumers who have become accustomed to disclosure and sustainability in the purchase of securities expect the same rules to be applied to their insurance. Recent court decisions indicate a willingness to recognize this blurring by placing increased liability on both the agents and their companies where issues of consumer rights are involved. The combination of a marketplace in transition, an aging population, and evolving judicial standards translates into increased legal liability and a more complex range of ethical responsibilities.
OBLIGATIONS OF THE INSURANCE (FINANCIAL SERVICES) PROFESSIONAL It follows from Huebner’s characteristics of the professional that the insurance agent/professional has at least two major obligations – to know about the product and to look out for the best interests of the client, avoiding the temptation to take advantage of the client. This mandate is embodied in the
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pledge that all new CLU and Chartered Financial Consultants (ChFC) designees of The American College must make. ‘‘In all my professional relationships, I pledge myself to the following rule of ethical conduct: I shall, in light of all conditions surrounding those I serve, which I shall make every conscientious effort to ascertain and understand, render that service which, in the same circumstances, I would apply to myself.’’ Obviously the pledge is a version of that great moral precept, the Golden Rule, found in every great civilization and great religion since the beginning of history. Why is it that the Golden Rule is the cornerstone of all the major religious ethics of the world as well as the cornerstone of the moral and ethical demands of the Society of Financial Service Professionals? Simply because it captures the essence of what morality and ethics are about. Morality and ethics involve society’s ethos and mores – the way people do things and the rules, expressed or understood, they use to govern themselves. No society can survive without such mores and rules, so no society is without some code of ethics. Morality is a social institution (or God-given set of laws) that sets the rules of right and wrong. Agents concern may change. Their approaches may change. But, the fundamentals of the ethical obligations of all agents do not. Agents, as agents, whatever their tasks and whatever they are called, are obliged to put their client’s interests first. The golden rule appeals to reason and it is the use of reason as opposed to the use of force that allows human beings to determine what is just and fair – what everyone is due. And what is the most rational way to adjudicate a dispute? The Golden Rule. Since others are like you, what is the best way to treat them? Assuming you treat yourself well, treat them as you would be treated. This is the essence of fairness and the basis of professionalism, and fairness is the basis of ethics.
OBSTACLES TO FOLLOWING THE GOLDEN RULE However, it is not always easy to sacrifice one’s own interest for the sake of another’s. Given the structure of financial instruments and the fact of their complexities, various temptations and conflicts of interest arise. Conflicts between the interests of the client and the interests of the agent; conflicts between the interests of the client and the company; and as we saw recently in the case of Marsh-McClennan, conflicts between the interests of the shareholders and the policyholders. We will begin by examining the conflicts between the interests of the agent and the client. Since to be a professional means to have a certain expertise, it
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follows that professionals usually know more than their client, so that the client is vulnerable in a market transaction. In that case the client must trust the word of the professional, who if competent, has sufficient knowledge about what courses of action are advantageous to the client. Certainly selling insurance and financial instruments can be done in a transactional manner over the counter at the bank or on the Internet, and there are simple financial instruments that are probably best sold that way with the proviso of caveat emptor. But the financial needs of large numbers of people are complicated and the availability, scope and complexities financial instruments require in many cases well-intentioned sales people to explain and sell these instruments. So while people can buy some relatively simple products such as term insurance and purchase a no-load mutual fund, there are times they need a more complex product. In those cases, since the purchasers either are not capable of understanding the complexities or do not have the time or desire to understand them, they need an expert adviser to help them decide which investment decisions are sound.
THE RESPONSIBILITIES OF AN ADVISER It should be apparent then, that the obligations of the insurance or financial services professional are the obligations that accrue to an adviser. What is ethically required of an adviser? Giving advice is a unique human practice. It requires a person to set aside their own self-interest and concentrate on what’s good for the advisee – the process of looking out for the best interests of another that is the heart of professionalism. We see this in one of the noblest of professions, medicine. The doctor’s primary concern is the well-being of the patient. That’s why doctors exist – to help others achieve health and well-being. There is general consensus that the most despicable thing a doctor can do is prescribe treatment that the patient does not need in order to increase the physicians revenue stream. The most severely criticized element of Managed Care Organizations is capitation systems, which reward doctors for prescribing less. Such capitation systems set up a temptation in the way of the doctor fulfilling his responsibility, which is to look out for the well-being of the patient, even if it is contrary to the doctor’s own interest. In financial services as well as other areas, it is probably the case that the biggest obstacle to ethical behavior arises from the need for compensation. Insurance agents traditionally are paid by heavily front-loaded commissions on sales. Other financial planners are paid commissions on the products they
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sell. In many cases unless they make a sale their work is uncompensated. Since sales of financial instruments is generally a difficult proposition, where commissions are the only source of income, there is significant temptation to make the sale. As the profession of insurance sales evolved into a financial adviser position some agents began to work solely on a fee for services basis. But this usually works only with very affluent and wealthy clients, not with the average income earner. Most individuals are not affluent enough to be willing to pay a financial adviser a fixed fee. In those cases pressure is put back on the professional to make a sale for the commission. Such pressures lead to misrepresentation or unnecessary replacement or churning of products or simply selling unsuitable products.
SUITABILITY, COMPETENCE AND DISCLOSURE One of the first requirements of the financial services professional, especially noted by the SEC and NASD is to provide suitable recommendations to the client. The NASD manual requires a securities dealer recommend only suitable products. That means the professional should make reasonable efforts to determine the client’s financial status, the client’s tax status, the client’s investment objectives and other relevant information that would affect the recommendations. Such concern with the suitability of the products recommended means the customer is being treated fairly. One other requirement of fair treatment is to explain and educate the client on the pros and cons of the proposed alternative strategies. All of this of course, requires that the agent has the competence to ascertain what policies or products best suit the client’s needs as well as the will power or moral fiber to overcome the lure of recommending a less suitable policy that pays a higher commission. Besides competence, it is important in fair dealing that the professional engage in appropriate disclosure. Selling financial products is, among other things, a market transaction. In the ideal market transaction two people decide to exchange goods because they hope the exchange will make both better off. That is the genius of the market, and the defense of our free market system. In a market exchange, nothing new has been produced, but both people are better off because of the exchange. Ideally, there is perfect information about the worth of what is being given and gotten in return. Such a trade, freely entered into with full information should maximize satisfaction on both sides. However, if one of the parties is mislead into believing a product is not what it is because it is misrepresented, the effect of both sides being better
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off is undermined. Deception usually leads to the deceived party getting something different and less valuable from what they expected. The deceived party most likely would not have freely entered into the exchange had he known the full truth about the product. So the conditions for an ideal trade include the freedom or autonomy of the participants, and full knowledge of the pertinent details of the product, which are required if we are to have what is often called informed consent. One could say that a choice based on inadequate information is not a choice at all. One’s consent cannot be presumed to be given if one is either forced into an exchange or lacks adequate knowledge of the product one is bargaining for. Since misrepresentation is a lie, it may be helpful at this point, to look at what a lie is and what’s wrong with lying. When asked what lying is, some people answer, it’s saying something false, thinking they have gotten to the essence of what lying is. But saying something false is not always lying. For example, sometimes people simply make a mistake and misspeak. Telling a lie involves more than simply getting things wrong and not telling the truth. The essence of lying is found in its purpose. When lying, besides just making false statements, one is attempting, usually by speech (one can lie with gestures or looks), to get the other person to act in a certain way. So lying can be seen as a deceptive activity meant to evoke a certain response that would not have occurred if the truth were told. Simply put, we lie and deceive others to get our way. This becomes clear if we think about children who are notorious liars (it takes some growing up for them to develop into honest people). Mostly they lie to avoid punishment. A child draws on the wall with crayons. She is asked if she did it. She says ‘‘No.’’ Why? Simply to avoid being punished, i.e., to bring about behavior in the parent or supervisor other than punishing behavior. So the child lies to elicit desired behavior that he thinks would not occur if the truth were known. Let’s apply this notion of lying for the purpose of changing behavior to deceptive sales. From this perspective, a deceptive sale is an activity whose goal is to get the buyer to do what the seller thinks they probably would not do if they know the truth. The agent tells the client the insurance policy is a savings plan. From an economic point of view, as we have seen, such a procedure violates the ideal market principle of perfect information, but more importantly from a moral point of view, in getting the buyer to do other than they would, the seller takes away the buyers real choice in the situation and thereby uses the buyer for his own ends. Such use is unjust and immoral and is often called exploitation and/or manipulation.
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Quite often we hear it said that we should not lie, because if we do people will not trust us. That is true. But that is a somewhat self-centered reason for not lying. From a moral perspective, the primary reason for not lying is that it subordinates another to your wishes, without their consent, for your benefit, without concern for theirs. It violates the Golden rule which says, ‘‘Don’t do to others what you wouldn’t have done to you.’’ You want to know what you are getting when you buy something. So does everyone else. While there is general agreement about the fact that misrepresentation is wrong, there is significant dispute about the responsibility to disclose. From an ethical point of view, disclosure is a much more complicated issue for the insurance agent. How much is the agent ethically obliged to disclose? It is an accepted principle in effective salesmanship (not to be confused with ethical salesmanship) not to say anything negative about the product one is selling and certainly not to disclose shortcomings unnecessarily. For example, if you are selling your home is it necessary to point out all the little defects that only you living in the home know? If you do, you probably succeed in discouraging every prospect from buying it. If you go on a job interview and sell yourself, should you point out the flaws you have to your prospective employer? I know of no job counselor who suggests that. So the questions arise, how much does one need to disclose and to what extent can failure to disclosure be construed as market misconduct? To get at that question it is necessary to reflect on how lack of disclosure might be similar to lying. Some would say, ‘‘not disclosing isn’t lying, it’s just not telling,’’ but that misses the point. Any action of deliberately withholding information to get another to act contrary to the way she would with the information has the same deceptive structure and consequence as the overt lie. It does not allow an informed choice. But, the question still occurs, ‘‘Must one disclose everything?’’ Certainly some failure to disclose is wrong, but how much must we disclose? The above characterization of lying should help us decide. Whenever you are tempted not to disclose something, ask yourself why you are not disclosing. If you are withholding information because you fear losing the sale if the consumer or client knows the whole story, you are manipulating. You might object, saying there are times when one does not benefit from not disclosing, as in some social occasions. For example, when your friends ask how you are. You don’t have to disclose that you feel miserable. They probably do not want to hear it. Or when your friend asks how they look, you do not have to say, ‘‘Like you just got out of bed.’’ That kind of socially acceptable
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non-disclosure is acceptable because in those cases one is not trying to change the behavior of another to personally benefit from it. Hence, if one lies for some other reason than manipulating the behavior of the one lied to that kind of lie may not be wrong. It is what we call a ‘‘white lie.’’ Having said that, though, I would introduce a caveat: in such social situations there may be a great deal of paternalism involved, and a great many assumptions being made about what the other wants or needs. It is not clear if it is a totally harmless activity. But to return to our main point, it is the case that in some situations it might be hard to decide how much to disclose. Let me introduce a brief scenario that my students quite often vehemently disagree about. Brock Roberts, CLU and Cosmic Life agent, needs one more sale to qualify for membership in Cosmic Life’s top production club and a trip to Aruba. Marie, a client who buys all of her insurance from Brock, has a clearly established need for additional insurance. She has asked Brock for three proposals from companies with equal credit ratings. Brock presents illustrations from Cosmic Life, Stable Life, and Exciting Life. He accurately demonstrates that all three policies will fill Marie’s need. If she chooses Cosmic, Brock will win the trip. Exciting Life pays a first-year commission that is much higher than that paid by the other two carriers and Stable Life has the strongest longterm financial performance history of the three companies. These facts are unknown to the client. Marie asks Brock to ‘‘recommend the best of the three.’’ Brock recommends Cosmic to Marie and that is what she buys. Marie has no inkling that Brock is on the verge of winning an Aruba trip. Should she know this? Why or why not?13
As I said, I get vehement disagreement about whether Brock should disclose the trip. I am inclined to think that even if Brock thinks that Cosmic is as good a buy as Stable or Exciting, and even if he feels comfortable recommending it, he should still disclose the information about the trip. How is one to decide? In the face of such disagreement, I would suggest adopting the following test: ask yourself why you would be reluctant to disclose the trip? In the discussions of this case, I have heard any number of reasons given for not disclosing. ‘‘No one does it.’’ ‘‘It’s not necessary, the client trusts me.’’ ‘‘The client doesn’t need all that information, they’ll just get confused.’’ ‘‘It’s no business of the client’s.’’ Are these reasonable defenses of the behavior or are they rationalizations? I don’t see a good reason not to disclose. If you are reluctant because you think telling the client about the trip will affect the sale, shouldn’t you disclose it to give the client that option? If you
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are reluctant because you think telling the client won’t affect the sale, since the client trusts you implicitly to do the best for him, then why be reluctant to disclose? If you are reluctant because you think too much disclosure gives too much information and will confuse the client, aren’t you putting yourself in the position of deciding how much information the client can handle? And how do you determine how much? In withholding possibly relevant information aren’t you creating a questionable paternalistic relationship? Why not just give the client the information and let him decide? As an added consideration, one might contemplate what would happen if the client buys Cosmic Life on Brock’s recommendation, and it does not perform as well as Stable or Exciting. Later the client finds out the sale of Cosmic was tied to an all expense paid vacation. How will that look? Admittedly we have said that bad consequences to oneself do not constitute the primary reason to disclose, but it does provide us with a prudential consideration to keep in mind. But let us sum up the method for testing for when disclosure is necessary. If you are reluctant to tell the client you are selling insurance, ask yourself why? Perhaps you do not think an insurance policy best fits the needs of the client. In that case you should disclose because you are putting your interest before the best interest of the client. Perhaps you think the client does not want insurance so much as a straightforward mutual fund program. In that case you should disclose, again for the same reason. Are you glossing over the non-guaranteed aspect of cash value projections in variable products? Why? Perhaps you think that if the client realizes the growth promises are not guaranteed, they will look for another product. Once again, if that is so, it seems clear you are putting your interests above those of the client and using the client to further your own goals. That violates the central ethical tenet of ‘‘Do unto others what you would have done unto you.’’ Such non-disclosure fails to respect the other and treats him or her merely as a means or instrument to be used for your own gratification. That is what the great ethical Immanuel Kant saw as the height of immorality. However we resolve the issue now, the question of how much disclosure is necessary in order to avoid manipulation of a client and whether commissions and other costs should be disclosed is being talked about and will continue to be talked about intensely for the next few years. Consumers will demand to know what they are buying and agents will be pressured into disclosing more and more. Old practices will be reviewed and reformed. That is how ethics usually solves these issues. For now, the safest road and the most ethical is the following: WHEN IN DOUBT, DISCLOSE!!!
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THE AUTONOMY OF THE PROFESSION: WHOSE AGENT ARE YOU? THE CAPTIVE AGENT Aside from the professional’s concern of putting his or her own self-interest aside in looking out for the client’s best interest, there is a question of other conflicts of interest. One of the most pressing is the conflict between the client’s interests and the company’s interests. This arises in the classic problem of the captive agent. How is it possible to look out for the best interest of the client if one is an agent of the company and the interest of the client conflicts with the interest of the company? Among producers there are three main categories: Brokers, Independent Agents and Captive Agents. A broker is an agent of the client and merely sells insurance to the clients. Insurance agents, as distinguished from brokers, however, are agents of the company. Independent Agents, while they do not sell exclusively for one company, still sign contracts with the companies that make them agents of the company. Captive agents work exclusively for the company, and usually sell only the products of that company. Legally, any insurance agent who signs a contract with a company acts as an agent for that company and agency law requires the agent to act on behalf of the principal, which is the company. As we mentioned even an independent agent, signs a contract with a company so that in his dealings he is bound by the laws of agency to act on behalf of the company. One could say there is a sense in which the independent agent is not so independent. Still the purchaser of the insurance policy expects the insurance agent to look out for the best interest of the client. This creates an ongoing conflict of interests for the agent.14 How is the agent supposed to overcome this conflict of interests or obligations? I want to propose that the conflict, at least ethically, is apparent rather than real. Of course, there are conflicts between what an agent or broker wants for himself or herself, or between what they need or think they need (short term) for themselves and what is good for the company and/or the client. There are also conflicts between what the company looks for and what is good for the client. I want to argue that those wants or apparent needs or what the company looks for are not valid. Legally an agent is a person who has received the power to act on behalf of another, binding that other person as if he or she were himself or herself making the decisions. The person who is being represented by the agent is referred to as the ‘‘principal.’’ Companies claim that their agents are agents of the company and not the client and insist that the agent has an obligation to look out for the company’s interests before the clients. This is certainly
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the case when an agent signs a binding contract on behalf of the company with the client. If the agent bound a company to an insured knowing that the insured was a serious underwriting risk that would violate the agent’s fiduciary responsibility to the company. But other than cases such as that, the claim that the agent is an agent of the company is a largely inconsequential claim. Agency law serendipitously perhaps, requires that an agent act on behalf of a principal. That is often interpreted as acting in the principal’s best interest, or as the principal would act. But what is the principal’s best interest? Here Shakespeare’s quote comes to mind. ‘‘This above all to thine own self be true.’’ It would be in one’s best interest to be true to one’s self. But what counts as being true to one’s self? Suppose we answer that as ‘‘be true to one’s mission – one’s goals, for those are what define you. If we take a look at the goals companies lay out for themselves, we can see how companies define themselves. Let’s examine the mission statements of some representative companies. Begin with Northwestern Mutual. According to its mission statement: Northwestern Mutual exists to help policyowners and clients protect against financial risk and achieve financial security. The company, with its subsidiaries and affiliates, offers insurance products, investment products and advisory services that address client needs for financial security and protection, capital accumulation, asset distribution and estate preservation. Protecting the interests of policyowners and other clients requires a purposeful fairness – to ensure that policyowners and beneficiaries get what they should get. This tradition has been carefully bred in our tradition. Long before they were popularly defined in the business press, such terms as ‘‘high ethical standards’’ and ‘‘integrity’’ were ingrained in the spirit of Northwestern Mutual. The mission of the Northwestern Mutual Financial Network is to develop enduring relationships with clients by providing expert guidance for a lifetime of financial security. With the help of a network of specialists, financial representatives provide innovative solutions using world-class insurance products and investments.
Consequently one could say that, given its mission statement, that to act on behalf of Northwestern Mutual means to help policyowners and clients. To serve their interests. Other companies are similar to Northwestern. MetLife, for example, defines itself in the following way: For more than a century, MetLife has built a reputation as a company that believes in fair dealing, integrity, and trustworthiness. We firmly believe that adherence to the highest standards of ethical conduct is the only acceptable way of doing business and is the personal responsibility of every one of our associates. The company’s well-known
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name and good reputation are reinforced by our pledge to deliver value and world class service to all who do business with us, always keeping in mind what is best for our customers. The importance of ethics and compliance to the Company is demonstrated by the Company’s extensive efforts and resources directed to this area. We are committed to our compliance vision of having MetLife be the world’s most trusted company. Supporting these efforts are the MetLife core values of integrity and honesty, the fundamental building blocks of our long and successful history that shape the way we do business. These values are central to our efforts to achieve the MetLife vision – to build financial freedom for everyone – and emphasize our outward focus on customers and their needs. We recognize that our ongoing success will spring from these values and, as we look to the future, we remain committed to the highest standards of ethics, integrity and trustworthiness, while continuing to pursue a strategy of building financial freedom for everyone. This defines who we are.
Thus if the MetLife vision is ‘‘always to keep in mind what is best for the customers,’’ its mission is exactly parallel to the ethical pledge of looking out for the client’s best interests.15 That leads to a simple syllogism: An agent is one who acts on behalf of a principal. To act on behalf of is to follow the principal’s goals. If the principal’s goals are to benefit the client the agent must act to benefit the client. Therefore, the agent who acts on behalf of a company must act to benefit a client. A serious company with a commitment to serving the public would require that its agents have fiduciary responsibility to serve that commitment. Similarly a broker as a broker has a goal of being of service. We mistakenly think that acting on behalf of a company is acting to help that company maximize a profit. That is the commercial point of view. But as we have seen that commercial perspective may not be congruent with a company’s mission and acting to maximize profit may not be consistent with the mission of the company (the principal). Of course, the agent cannot engage in deception which would help the client take advantage of the company, but in most cases there is no conflict between acting on behalf of the company and in the best interest of the client, since most companies’ purpose is to advise and aid clients. In this area of conflicting interests, it might help to think of the requirements as a three-legged stool. The company has a responsibility, under stakeholder theory, to look out for the client’s interest as well as the shareholder’s
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or other policyholder’s (if it is a mutual company) interest. A system that only worries about the company profit and the agent’s commission and takes advantage of clients will not stand. Equal concern must be given to the third leg, the client. The company as well as the agent has an obligation to look out for the interest of the client. That is why the company sells a product – to serve the interests of the client. Marsh and McClennan did not fail because they took contingent commissions. They failed because they did not pass on the savings in a fair way, to both the stockholder’s and the policyholders. Marsh is a brokerage firm with a fiduciary responsibility to its clients. As it says in its mission statement: MC has evolved from its beginnings in 1871 into a global professional services firm with revenues exceeding $11 billion. It is a professional services firm, offering analysis, advice and transactional capabilities. Marsh provides global risk management, risk consulting, insurance broking, financial solutions and insurance program management services for businesses, public entities, associations, professional services organizations and private clients.
Marsh is an advisory firm. It is a broker firm. As we have seen, in such a capacity as advisor and broker, it has ethical responsibilities to its client that were paramount. It failed in those duties. It concerned itself with only two legs of the stool. Finance professors and economists may insist that the goal of any for profit is to maximize shareholder value. But that is simply untrue. It reflects the strictly commercial point of view and has no place in the world of financial services. Services imply professionalism and concern for the best interest of one’s clients. Some ethical relationships exist simply by virtue of the fact that we share the same world. Other relationships exist because we have entered into some sort of relationship with another that involves some sort of commitment to them. In any society there are various relationships, some natural and some conventional (literally based on agreements), that help in the smooth functioning of the particular societies. A great deal of those relationships, the conventional ones, is based on something like promises made, or implicit or explicit contracts to which people are committed. Societies set up a number of jobs (the division of labor) and people who more or less freely take on one or more of those jobs, commit to do the things the job requires. Commitment to jobs and relationships automatically carry responsibilities with them. The insurance and financial services professional has made such a commitment and taken on a most important job in the economic community for
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the sake of bringing security and peace of mind through the management of risk. As we have shown, it is a useful and even noble profession. It behooves those in the profession to take seriously the basic responsibilities that such a role carries with it.
NOTES 1. Gallup, G. Jr.: 2001. ‘Honesty and Ethical Standards’, in The Gallup Poll: Public Opinion, 2000, (Scholarly Resources Inc., Wilmington, DE, pp. 265–266. As Cited in B. Stevens, ‘‘The Ethics of the US Business Executive: A Study of Perceptions,’’ Journal of Business Ethics 54: 163–171, 2004. 2. Richard G. Rudolph, Nearly Everything You Wanted to Know About The History of Insurance, p. 9. Chicago Chapter, CPCU Society, 1998. 3. Rudolph, 1998, p. 32. 4. Life Insurance Fact Book. ACLI. 1996, p. 130. 5. Gilfor Morse, quoted in The National Association of Life Underwriters: Fiftieth Anniversary, The National Association of Life Underwriters, New York, 1939. p. 14 6. Ibid. p. 20. 7. Ibid. p. 21. 8. Jack Bobo, ‘‘Final Say,’’ National Underwriter Life and Health, Sept. 13, 2004. Vol 108, Iss. 34; p. 66. 9. National Association of Life Underwriters, p. 22. 10. Solomon S. Huebner, ‘‘How The Life Insurance Salesman Should View His Profession,’’ in Ethics and Human Values, edited by Ronald Duska, The American College, Bryn Mawr Pennsylvania, 2000. 11. ‘‘At year end 2001 there were almost 179,000 full-time affiliated agents contracted with 97 companies, down 8 percent from the count in 1998, and down 25 percent from 10 years ago.’’ P. 6 ‘‘Census of U.S. Sales Personnel: Calendar Year 2001,’’ LIMRA International, Inc., 2003. 12. ‘‘The Gramm-Leach-Bliley Act implemented the most sweeping overhaul of financial services regulation in over 60 years by eliminating the barriers between banking, investment banking, and insurance. It allows for affiliations between banks and other financial companies who may now establish so-called financial holding companies that can include commercial banking, securities underwriting, insurance underwriting, and merchant banking. This act lays the groundwork for significant further consolidation in the U.S. banking and financial industry.’’ Cf. Ronald Duska, Ethics for the Financial Services Professional, The American College, Bryn Mawr, PA, 2003. pp. 1–11. 13. From, The Best of Strictly Speaking, Burke A. Christensen and Ken Cooper, Editors, The American College and the American Society of CLU and ChFC, Bryn Mawr, 1995. 14. This is not a problem for brokers since brokers are required by law to act as agents for the client. Marsh in its recent difficulties failed to fulfill this fiduciary responsibility to its clients. There is a claim by the SEC that a broker is a fiduciary of the client. Recently, the CFP board wanted to claim that financial planners should be
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fiduciaries. Agency law requires or at least implies a fiduciary relationship, and these have been much debated of late in terms of whether an agent is a fiduciary. 15. We could do this over and over with different companies. Suffice it to finish with two examples, one from an investment firm Morgan Stanley and one from Marsh-McClennan. The first principle of the Morgan Stanley code of ethics is: ‘‘ACT IN THE BEST INTERESTS OF CLIENTS, THE FIRM AND THE PUBLIC http://www.morganstanley.com/about/inside/governance/ethics.html. Fair Dealing The Firm seeks to outperform its competition fairly and honestly through superior performance. Every employee, officer and director must therefore always keep the best interests of the firm’s clients paramount and endeavor to deal fairly with suppliers, competitors, the public and one another. No one should take unfair advantage of anyone through manipulation, abuse of privileged information, misrepresentation of facts or any other unfair dealing practice.’’
THE PROFESSIONAL RESPONSIBILITIES OF LAWYERS: A STAKEHOLDER APPROACH Tara J. Radin The legal profession in the United States has endured generations of change (Pearce, 1995; Kronman, 1999; Allen, 2004; Peppet, 2005). Indeed, according to Judge Patricia M. Wald of the United States Court of Appeals for the District of Columbia, ‘‘Every generation of lawyers must find its own way, define its own crises and resolve or succumb to them, [and] make its own contribution to the life of the law’’ (Wald, 1982, p. 1). The early years of the 21st century are witnessing yet another process of redefinition as the practice of law adapts to current challenges, such as the Internet and increasing technological advances, the evolving role of corporate clients in new economy, and the presence of Sarbanes-Oxley. Most widely recognized for its impact on business professionals such as accountants and corporate executives, the Sarbanes-Oxley Act, enacted in July 2002, also issues a resounding wake-up call for legal professionals (Anello, 2004). Specifically, section 307 mandates the institution of an upthe-ladder reporting requirement for corporate counsel (Henning, 2004). This takes precedence over other perceived legal responsibilities to clients and arguably distracts lawyers from their primary obligations to their clients. This legislation is momentous in that, for the first time in history, the legal profession is made subject to external scrutiny.
Crisis and Opportunity in the Professions Research in Ethical Issues in Organizations, Volume 6, 67–83 Copyright r 2005 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 1529-2096/doi:10.1016/S1529-2096(05)06004-9
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Although Sarbanes-Oxley Act is directed specifically toward corporate lawyers, the ramifications of such legislation are far-reaching with regard to the legal profession in general. All lawyers today – not just corporate lawyers – find themselves questioning traditional norms and expectations. For nearly a century or more, lawyers in the United States have generally become accustomed to making decisions according to client preferences without regard for external influences or even their own independent moral judgment. Sarbanes-Oxley signals a change in this. The public outcry has put lawyers on notice that they are no longer willing to accept unconstrained advocacy. The advent of the Internet translates into better informed and more demanding clients and has increased the competitiveness among law firms (Regan, 1999; Greene, 2004). The availability of information on the web means that clients are able to help themselves with regard to many matters. Even where clients need legal representation, they can obtain for themselves background information about potential lawyers (Browning, 2005). In addition, technological advances have changed how the practice of law can be accomplished (Fisher, 2004). As the climate for lawyering has changed, so have the professional responsibilities of lawyers (Glendon, 1994b). The dynamic nature of business in the 21st century has heralded in a host of new challenges – both for businesspeople and for lawyers. The gaps between the written rules have increased such that it is incumbent upon lawyers to exercise their own discretion in more and more situations. The purpose of this article is to explore the changing nature of the professional responsibilities of lawyers. It begins with an examination of law as a profession and the responsibilities voluntarily assumed and upheld by legal professionals. The article then explores how the enactment of Sarbanes-Oxley has potentially changed the way lawyers interpret and administer their responsibilities. Finally, the article concludes by offering a new way of thinking about legal responsibilities that builds on parallels between law and business in order to show how legal professionals can reconceptualize their roles and responsibilities in order to promote enhanced professional and moral accountability.
LAW AS A PROFESSION: WRITTEN RULES AND ZEALOUS ADVOCATES Considerable discussion has taken place during the past 25 years or so regarding professional ethics (Donaldson, 2000). While there has been some
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degree of disagreement surrounding ‘‘who counts’’ as a professional, there tends to be general agreement that law is a profession. The practice of law requires specialized training, qualification, and adherence to an independent ethical code. Further, as a profession, law is self-regulated (Goyer, 2004). Although the practice of law has become quite diverse, legal professionals share common skill sets and encounter similar challenges in the disparate endeavors in which they engage. Although the profession itself is much older, the conduct of legal professionals in the United States has been governed by a code of ethics for nearly 100 years. In 1908, the American Bar Association (ABA) promulgated the Canons of Professional Ethics (Canons), the first national code of legal ethics. This was the profession’s code until 1970, when the ABA approved the Model Code of Professional Responsibility (Model Code) in its place (Altman, 2003). In 1983, the ABA adopted the current Model Rules of Professional Conduct (Model Rules), subsequently revised in 2002 (Fox, 2002; Lande, 2003). During its time, each of these has served as a primary source of guidance for resolving ethical dilemmas in the practice of law. The evolution of the code of ethics for legal professionals has not so much reflected substantive changes in what has been considered acceptable behavior as it has reflected increased interest in having concrete rules to guide ethical decision-making among legal professionals. The Canons, which reigned for 62 years, identified broad norms and aimed generally to promote honesty and integrity among legal professionals (Mick, 2001). The Canons proved aspirational but not entirely tenable. The purpose of the Model Code was then to connect the broad norms to principles that could guide lawyer discipline (Bracey, 1993). The Model Rules go a step further in that they include black-letter rules aimed at guiding legal professionals through the specific sorts of ethical dilemmas that inevitably arise in the practice of law (Hazard, 1982). This facilitates both the resolution of perceived ethical dilemmas as well as the process of disciplining lawyers who fail to behave appropriately. Lawyers have traditionally viewed their professional responsibilities as rule-based (Chambliss, 2000; Hayden, 2003; Goyer, 2004). What is written has generally been considered sacred; everything else, however, has often been considered fair game. Since there is no explicit written rule that lawyers are expected to exercise independent morality, many lawyers have used this as a license to abandon their personal ethics and independent moral reasoning. Since the written rules have prioritized client interests, for many lawyers and legal scholars, this has translated into a positive obligation of the so-called ‘‘zealous advocacy’’ (Higgins, 1999; Smith, 2003).
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The notion of zealous advocacy dates back at least a century. Traditional interpretations of the role of the lawyer, based on the Canons, have prioritized client representation. According to Canon 7, a ‘‘lawyer should represent a client zealously within the bounds of the law.’’ This has translated into a perceived duty of ‘‘zealous advocacy.’’ The Preamble to the Model Rules echoes this notion in stating that the principles underlying the Rules ‘‘include the lawyer’s obligation zealously to protect and pursue a client’s legitimate interests’’ and that, as an ‘‘advocate, a lawyer zealously asserts the client’s position under the rules of the adversary system’’ (Lande, 2003). The premise behind zealous advocacy is that it is for all legal professionals involved to represent the interests of their clients to the exclusion of all other interests and trust that the legal process will effectively sort through the competing interests in the pursuit of justice. Zealous advocacy has tended to serve as a dominant, if not the dominant, paradigm for the legal profession (Temkin, 2004). According to this view, it is the lawyer’s primary responsibility to employ all possible measures and to use all available resources in order to represent the client’s interests. Further, it is not for the lawyer to determine what lies in the best interests of the client; rather, it is the lawyer’s professional obligation to pursue ends consistent with the goals and interests as the client defines them (Higgins, 1999). The view is that, in order for the legal system to work, there have to be advocates for all sides of any legal dispute. Lawyers who represent the interests of unpopular clients should not be construed as taking on a cause, but should be understood as participating in a system. Lawyering is about service not activism. When a lawyer advises and/or represents a client, he or she is not affiliating with a cause. On the contrary, lawyers are expected to represent clients irrespective of their personal beliefs, in that ‘‘the professional ideal endorsed by the rules of professional conduct envisions a lawyer willing to diligently represent a client irrespective of any personal, moral, or ideological affinity between them’’ (Spaulding, 2003). This translates into what is commonly referred to as zealous advocacy. The lawyer not only represents clients without consideration for personal leanings but also does so zealously, using all possible ethical and legal resources and ideas available to him or her (Higgins, 1999; Alshuler, 2003). In fact, the often prevailing view is that the interjection of a lawyer’s personal values can actually be construed as interfering with effective representation in that a ‘‘lawyer who takes his duties to the court and the legal system seriously may well be at a disadvantage against a less scrupulous adversary’’ (Glendon, 1994a). The problem is that, over the years, lawyers’ understanding of themselves as moral actors with public accountability has deteriorated (Allen, 2004).
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This is openly reflected through the mass media, which are littered with caricatures of lawyers as morally bankrupt agents available to the highest bidder (Aspen, 1994; Gordon, 2003; Kendall, 2003/2004). These images are often linked to the sad reality that not all legal professionals have behaved responsibly. Many lawyers have made errors in judgment under the rubric of zealous advocacy and the cost has been to the reputation of the profession. Others have simply abided by very strict, arguably myopic, interpretations of what it means to be a zealous advocate, some of whom have pursued ‘‘any argument with even a patina of legal plausibility to justify conduct that has been called into question by an adversary’’ (Koniak, 2003). Ironically, empirical investigations reveal that the majority of lawyers do not behave according to such extremes (Gordon, 1998). Most lawyers admit that they ‘‘do not believe that they must press for every possible advantage and most lawyers do not usually behave that way’’ (Lande, 2003). As an aspirational ideal, zealous advocacy is both noble and fitting. Problems arise, however, when individual lawyers interpret this as a license to disregard basic morality and/or fundamental legal rules. In addition, the blind pursuit of zealous advocacy does not account for the broader role of lawyers as social creatures. Many lawyers see themselves as serving not only paying clients but also society in general. Because they are specially trained to advocate, many lawyers believe this translates into a positive obligation to provide representation – even for clients who cannot afford their services. This has prompted many lawyers and law firms to engage in pro bono – voluntary, not-for-profit – representation of clients (Regan, 2001). It can more broadly be argued that lawyers serve society as ‘‘guardians of the law’’ through which they ‘‘play a vital role in the preservation of society’’ (Perlman, 2003). Core values embedded within the practice of law therefore exist that could be used to constrain zealous advocacy; it is just that many lawyers have chosen to disregard those values. It is not clear that this will be an option moving forward.
ENRON AND 21ST CENTURY CORPORATE FRAUD: WHERE WERE THE LAWYERS? The notion of zealous advocacy continues to generate considerable controversy, particularly during recent years in the wake of Enron and the host of other corporate scandals that resulted in massive financial fraud perpetrated against a huge array of innocent third parties. Although much of the fall-out from these situations has been for business professionals such as accountants,
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a related question has emerged: Where were the lawyers? They had to be there, for lawyers are inevitably involved in some capacity, if only as advisors and/or paper-pushers, in virtually all corporate transactions – ‘‘business lawyers are transaction engineers’’ (Griffith, 2003, p. 1224; Morgan, 2003; Ahuja, 2004). So why did they not blow the whistle on the corporate fraud? The answer is quite simple: The lawyers were there, but they remained silent because they believed that to blow the whistle would have entailed acting contrary to the articulated interests of their clients, which they were not willing to do. Many of the lawyers involved asserted lawyer-client privilege. While they had some degree of knowledge, they considered themselves barred from sharing that information because it was obtained as part of privileged lawyer-client communication. In other words, it was not their choice to make. Once information is revealed within the context of privileged lawyer-client communication, the lawyer is barred from sharing that information with anyone else. There is a strong belief that the lawyer-client privilege takes precedence and prohibits lawyers from intervening in order to mitigate the consequences of the behavior of their clients, simply because their knowledge of that behavior is based on privileged communications. The lawyer-client privilege has traditionally stood as one of the most revered principles of the legal profession because of the feared chilling effect on necessary communication between lawyers and clients were that privilege was not in effect. In the end, however, all was found out – what the Enron executives did, how the accountants were involved, and what the lawyers did not do. The consequences of the irresponsible behavior of all of these parties are shared by all of us. Our economy has suffered billions of dollars in stockholder losses and tens of thousands of jobs (Byrne, 2002). Even more devastating, perhaps, has been our loss of confidence in corporate America (Stevenson, 2002). We must now add to the list of consequences the further deterioration of trust in American lawyering. While businesspeople and accountants arguably shoulder the lion share of the blame for the wrongdoing, lawyers were positioned with constructive if not actual knowledge of what was going on, and their failure to act to prevent the harm enabled it to occur. This poses a serious problem for American society. If clients are able to manipulate privilege in order to silence their lawyers and render them virtual accomplices in their perpetration of fraud and other criminal activities, if we cannot trust our lawyers to advocate not only for their clients, but also for the laws, then we as a society are in deep trouble. The American legislature chose not to leave the rectification of this situation solely to the discretion of the lawyers any longer (Kendall, 2003/2004). Congress responded to the wake-up call issued by Enron and related disasters
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by mandating a positive duty for lawyers to act in certain situations regardless of privilege. Since too many lawyers failed to recognize their independent moral responsibility for third parties, section 307 of Sarbanes-Oxley now removes that choice from their discretion. According to this provision, corporate lawyers (in-house or external) are required to report evidence of material illegal activities. This means that, if a corporate lawyer obtains evidence, regardless of how (by stumbling upon information, witnessing events, through ‘‘privileged’’ communication, and so on), of suspecting wrongdoing by the client firm or any of its agents or cohorts, section 307 requires the lawyer to share that evidence with higher executives and/or external parties (Stabile, 2004). In this way, Sarbanes-Oxley explicitly adds public accountability to the list of responsibilities for legal professionals. As a result of section 307, corporate lawyers now hold dual roles in that they serve as advocates for the firm as well as gatekeepers for the public and other stakeholders. Although section 307 is problematic, in that it lacks the imposition of economic incentives to encourage lawyer compliance, it stands as a major step forward in the assignment of public accountability (Kostat, 2004). This is a significant change for multiple reasons. First, it represents external oversight of a traditionally self-regulated profession (Pearce, 1995; Goyer, 2004). This arguably signifies a turning point for the legal profession, which could be seen as much needed (Kostat, 2004). Second, it potentially undermines lawyer-client privilege, traditionally understood as a pivotal principle in the legal profession. Communication, traditionally protected by privilege, not only ‘‘can’’ now be revealed, but ‘‘must’’ now be revealed under the circumstances outlined in section 307 of Sarbanes-Oxley. Third, it creates a potentially duplicitous role in positioning the lawyer as both advocate for the client and gatekeeper for third-party interests. These sorts of changes are inevitably compelling corporate lawyers, if not lawyers in general, to take greater care in exercising discretion with regard to how they represent clients. Donaldson (2000) points out the number of pressures, particularly financial, weighing on professionals such as lawyers that challenge their ability to maintain their integrity in their representation of clients. Donaldson questions specifically how they ‘‘can find the moral free space necessary to maintain professional integrity in the face of financial pressures’’ (Donaldson, 2000, p. 87). ‘‘Moral free space’’ refers to the gap between laws and ethics in which decisions are held to the discretion of community-based standards (Donaldson & Dunfee, 1999) and ‘‘it is in this domain that law makes some of its most critical contributions to the ethical decision-making of those in business (Nesteruk, 1999, p. 516). Ironically, the
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absence of moral free space has been hindered arguably less by financial pressures, more by narrow interpretation of the written rules that guide the professional ethics of lawyering. What section 307 does that is so instrumental is to force a broader interpretation of client representation, at least within the context of corporate lawyering. Although Sarbanes-Oxley speaks directly to corporate lawyering, the nature of law as a single discipline suggests that there will eventually – perhaps sooner rather than later – be spillover effects for the practice of law in general. Corporate lawyers are lawyers first, corporate agents second. In addition, corporate lawyers work with other lawyers, formally and informally. It is therefore likely that the ramifications of Sarbanes-Oxley on the practice of law will be far-reaching.
CORPORATE LAWYERING POST-SARBANES-OXLEY: WHO IS THE CLIENT AND WHAT IS THE LAWYER’S ROLE? A major consequence of section 307 of Sarbanes-Oxley is that it forces a reexamination of the lawyer-client relationship. More specifically, it challenges lawyers to think more carefully about who the client is and what sort of information is privileged (Kruse, 2004; Stabile, 2004). Prior to Enron, while corporate lawyers recognized that they were obligated first and foremost to the firms they represented, they tended to attribute those obligations to the managers with whom they interacted, since a ‘‘firm,’’ in reality, is a fictitious entity – a mere ‘‘creature of law’’ (Morin, 2004). The underlying premise was that, since the managers were assumed to be acting in the best interests of the firm, in accordance with their understood legal responsibilities, it was appropriate for lawyers to represent firms by protecting the interests as articulated by firms’ managers. As the Enron debacle illustrates, however, managerial desires do not necessarily coincide with the interests of the firm. Section 307 therefore clarifies that the managers are not the clients. The client is the firm and, more specifically, the stockholders (Fraidin & Mutterperl, 2003). The lawyer is therefore obligated to prioritize the protection of those interests, especially where they conflict with those of managers or other firm agents. Information that the lawyer collects through interaction with managers in his or her representation of a firm is privileged only insofar as that privilege is linked to firm or stockholder interests.
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At the same time, Sarbanes-Oxley creates a new role for lawyers by positioning them as gatekeepers. Even as lawyers advocate for their client firms, they are explicitly expected to guard the interests of other stakeholders by being prepared to blow the whistle in the face of evidence of material wrongdoing. The result is that section 307 has inserted moral free space within the confines of the relationship between the corporate lawyer and the client firm. It might be tempting for corporate lawyers to manage their relationships with their firm clients so as to insulate themselves from access to the sort of evidence that might expose them to information about potential material wrongdoing. The imposition of gate-keeping responsibilities prevents corporate lawyers from doing this legally. Section 307 therefore creates inevitable internal tension for corporate lawyers and compels them to exercise their independent moral judgment more actively as they navigate through this new territory (Fraidin & Mutterperl, 2003; Griffith, 2003). The imposition of this sort of accountability is not without controversy. In fact, it has been contended that ‘‘[c]orporate lawyers are looking at a new job description: corporate informant’’ (Schmitt, 2002). Such a statement reflects the traditional, myopic view of the lawyer as being obligated solely to the client. The recognition of the multiple interconnected stakeholders affected by firm behavior suggests that such a narrow interpretation of a lawyer’s responsibilities is not appropriate (Greene, 2004). As Enron has demonstrated, lawyers are naturally positioned as gatekeepers – section 307 of Sarbanes-Oxley merely codifies what already exists. Corporate lawyers in particular are privy to information that is not only relevant to but can have a drastic effect upon many innocent third parties. It only makes sense that lawyers be expected and allowed to intervene to prevent serious harm from coming to them (Greene, 2004).
BALANCING INTERESTS: A STAKEHOLDER APPROACH The reality is that recognition of a broader role for the lawyer has been embedded in the practice of law for decades if not more (Radin, 2002). Although the prevalence of zealous advocacy has often seemed to overshadow the professional responsibility of lawyers to stakeholders other than clients, the adoption of section 307 of Sarbanes-Oxley suggests that this is changing. Sarbanes-Oxley both points to the existence of multiples stakeholders and delineates the types of responsibilities lawyers have to parties with divergent interests. While the client remains the primary party that a
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lawyer serves, multiple other stakeholders are also affected by his or her behavior and positive obligations flow from this. A broader examination of the practice of law reveals constellations of stakeholders, some with more direct obligations owing to them than others, to whom lawyers are accountable. In the business context, stakeholders refer to those parties who affect or are affected by the operations of firms. In the domain of law, stakeholders can be said to refer to those parties who affect or are affected by the administration of laws. As the legal system operates, multiple direct and indirect interests are implicated. For example, lawyers are commonly considered accountable not only to clients but also to the legal system, including judges, other lawyers, and the courts (Cramton, 2002). In addition, lawyers have also been deemed accountable to third parties such as intended beneficiaries (Cramton, 2002). The law also holds lawyers accountable to third parties who rely upon the advisory opinions that lawyers provide (and often publish) (Radin, 2002). Sarbanes-Oxley now identifies managers and other corporate agents as separate from the firm and stockholders, and recognizes the public in general as an additional stakeholder to whom lawyers are accountable. It is therefore perhaps more useful to identify the situation first and relevant parties second. While this is not the approach most often taken, it is not new in the practice of law. Nearly a century ago during his confirmation hearings to determine his suitability to serve as a Justice of the United States Supreme Court, Louis Brandeis described himself as a ‘‘lawyer for the situation’’ (Hazard, 2004). This reflects an understanding of the complexity inherent in determining the relative weights of the conflicting interests of various parties. The lawyer clearly must prioritize the representation of the client, but, in doing so, should not ignore his ability to influence the interests of other stakeholders as well. To do so is to perpetuate a different kind of injustice. This is similar to contemporary thinking about business responsibilities. Stakeholder thinking has emerged as a lens through which business relationships can be viewed and managed. The emphasis of stakeholder thinking in business lies upon the multiple interconnected relationships that affect and are affected by the operations of the firm. Identification of the relevant relationships enables managers to evaluate, balance, and prioritize competing concerns. Recognizing stakeholder concerns does not compel managers to address them; rather, it merely informs their decision-making and enables them to address them if and when it is appropriate. A stakeholder approach can be used to achieve a better understanding of the professional responsibilities of lawyers as well. Although lawyers have traditionally viewed themselves as serving clients exclusively, many other
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stakeholders, such as the media, the community, and so on, have considered themselves relevant as well. It is often possible for lawyers to serve multiple constituencies simultaneously. In fact, by recognizing the interplay between other stakeholders, lawyers can often serve their own clients more effectively. For example, by acknowledging the public as a stakeholder and identifying concerns of the public, a corporate lawyer can encourage negotiations between the firm and the public in order to prevent the situation from escalating (Molot, 1998). Lawyers, like firms and managers, are accountable to a broad range of stakeholders and this is what legal professionals today are recognizing more and more. As a result, firms are finding it necessary to attend to a broader array of interests in order to remain competitive. For example, law firms are having to pay greater attention to their internal structuring, such as with regard to diversity (Hyatt, 2005; McDonough, 2005). In doing so, as professionals, they are having to recognize the breadth, depth, and complexity of their responsibilities. The practice of law is not as simple as it was once thought – lawyering is no longer just about adherence to the canons and promulgated rules. There is considerable moral free space between the rules and those lawyers and law firms that view this not as a constraint but as an opportunity to excel by exhibiting greater accountability are the ones that will thrive.
THE BUSINESS OF LAW: REVISITING PARALLELS Drawing parallels between the disciplines of business and law has generated considerable debate (Stempel, 1999; Levine, 2003; Allen, 2004; Atkinson, 2004). Many lawyers loath to consider the fields related because they believe that demeans the legal profession. Whereas business is perceived as linked to personal gain, the practice of law is considered public service (Atkinson, 2004). At the same time, however, to ignore the parallels is to impede a deeper understanding of the very real business-like influences on lawyering. The fact of the matter is that ‘‘[l]aw is, and always has been, a business as well as a profession’’ (Kelly, 1999, p. 992). Recognizing the business of law and the parallels between business and law suggests why it is worth discussing the professional responsibilities of lawyers and indicates that it lies in the interests of lawyers who wish to remain competitive to take their professional responsibilities even more seriously than they have in the past. First and foremost, law is susceptible to the economics of the business world (Martyn, 1994; Bower, 1996; Pilcher, 1999). The changing business
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climate affects both the practice of law and the pool of potential clients (Allen, 2004). This reality does not detract from the value lawyers contribute through their service of those clients (Nexon, 1994). Lawyers need to earn a living, just as do other professionals and lay workers. It can also be argued that viewing law as a business encourages creative problem-solving (Regan, 2001). It has been argued that ‘‘once one escapes from the clutches of thinking of ‘profession’ and ‘business’ as dichotomies, and comes to terms with the fact that, whether we like it or not, they are joined at the hip in private practice, a refreshing set of possibilities reveals itself’’ (Kelly, 1999, p. 993). There are numerous examples of companies who have distinguished themselves through innovative business practices, stakeholder satisfaction, and so on. Law firms who model their approaches after such business firms can arguably enhance their creative positioning. In fact, a number of law firms are already benefiting from the lessons learned by their counterparts in business and they are influencing the profession as a whole. Sara Lee’s legal department, for example, has instituted a ‘‘preferred partner’’ program through which it discriminates among outside law firms with which it will do business (McDonough, 2005). Sara Lee’s legal departments, along with others, are in this way rendering it almost a necessity for outside firms to improve the values they exhibit. If a law firm wants to be able to attract corporate clients, it must elevate its standards to those considered acceptable by major potential clients. This is similar to business practices in the global labor practices arena. Companies such as Levi Strauss & Company (LS & Co.) will only do business with sourcing partners who abide by their standards and values (Radin, 2004). Inasmuch as LS & Co. is an attractive and often lucrative business partner, numerous factories around the world continue to elevate their standards to meet LS & Co. standards in the absence of any guaranteed business arrangement – merely to become eligible. The effect in the global arena has been overwhelmingly positive as a result of companies like LS & Co. who have increased the costs of doing business for those not behaving responsibly by depriving them of potential business opportunities. As Sara Lee’s legal department demonstrates, this is now happening in the practice of law as well. Legal professionals, like business professionals, have to reassess their professional responsibilities in the wake of Enron – both in order to preserve the integrity of their profession and to remain competitive within their professional domain. Further, section 307 of Sarbanes-Oxley introduces the concept of interpersonal accountability (Wendel, 2001). Lawyers live in the same community alongside other stakeholders. As professionals, lawyers
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serve clients; as individuals, they belong to a community in which everyone shares moral responsibilities. After extensive examination of successful businesses, Collins and Porras (1994) identified the key factors that have enabled businesses to endure over time. They found that long-term thinking is vital. In other words, the firms that succeed tend to prioritize vision over short-term profits. They are populated by professionals who are able to keep pace with changing times and who honor their interpersonal responsibilities to stakeholders (Collins & Porras, 1994). The message to lawyers is that they have to think beyond winning the case at hand. In order for them to engender long-term success, they must develop a reputation for honoring professional responsibilities, particularly post-Sarbanes-Oxley. No lawyer will ever be able to satisfy all stakeholder interests; by recognizing the array of existing interests and by addressing them appropriately, lawyers can effectively aim for long-term success (Bower, 1996).
CONCLUSION: PROFESSIONAL RESPONSIBILITIES OF TOMORROW’S LAWYERS The adoption of section 307 of Sarbanes-Oxley indicates that expectations of legal professionals have changed and are likely to continue changing. Whereas people have traditionally seemed to accept the lawyer’s zealous advocacy of clients without regard to independent moral reasoning, it appears that acceptance of blind, untempered advocacy is eroding. Although the Model Rules, and their predecessors, endeavor to simplify moral decision-making, the reality is that decision-making – for legal professionals as well as other professionals – is complicated and complex. There is no comprehensive rule book available – not for professional life or personal life (Allen, 2004). No matter how close a rule book comes, it inevitably falls short (Joy, 2002). Dilemmas exist for all professionals (Lerner, 2004). Interestingly, the advantage of professionals who do not have codes or rulebooks is that they have been forced all along to apply their own independent moral reasoning. In some ways, the presence of a written code of ethics has been a disservice to legal professionals in that it has frequently been used to obviate the need for independent judgment. Lawyers have become complacent, accustomed to applying the existing rules without questioning behavior not covered by those rules.
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As the norms gradually change, the education of lawyers will have to keep pace. At the current time, the emphasis of ethics training for legal professionals lies on preparing lawyers to pass the ethics section of the national bar exam, the MPRE (Chambliss & Wilkins, 2003). If our goal is to breed lawyers who act responsibly within moral free space, the place to start is in the law schools where their training begins. Many lawyers have reacted negatively to Sarbanes-Oxley. It flies in the face of much of what lawyers have traditionally considered appropriate. While it is true that the job of lawyering has been made more complex and subject to a higher degree of external scrutiny, this could actually improve not only the benefits to stakeholders but also the practice of law itself. As a former law school dean stated, ‘‘Our challenge is not public relations, it is human relationsy. Our professionalism – and our professional identity – comes from the independent judgment we exercise in matters relating to the lawy. Ultimately, my message is not to fight change, but to capture change, to make it work for the public in the context of professionalism’’ (Gerhart, 1994).
REFERENCES Ahuja, S. (2004). What do I do now? A lawyer’s duty post-Sarbanes-Oxley. Valparaiso University Law Review, 38, 1263. Allen, W. T. (2004). Corporate governance and a business lawyer’s duty of independence. Suffolk University Law Review, 38, 1. Alshuler, A. W. (2003). Lawyers and truth-tellling. Harvard Journal of Law & Public Policy, 26, 189. Altman, J. M. (2003). Considering the A.B.A.’s 1908 canons of ethics. Fordham Law Review, 71, 2395. Anello, R. J. (2004). Sarbanes-Oxley’s wake up call to attorneys. Penn State International Law Review, 22, 545. Aspen, M. E. (1994). The search for renewed civility in litigation. Vaparaiso University Law Review, 28, 513. Atkinson, R. (2004). Connecting business ethics and legal ethics for the common good: Come, let us reason together. Journal of Corporation Law, 29, 469. Bower, W. (1996). Law firm economics and professionalism. Dickinson Law Review, 100, 515. Bracey, F. M. (1993). Twenty-five years later – for better or worse? St. Mary’s Law Journal, 25, 315. Browning, R. (2005). Changes in profession to remain constant: Observers expect more transformation in next 15 years. Indiana Lawyer, 16(3), 24. Byrne, J. A. (2002). Fall from grace. Business Week, 51. Chambliss, E. (2000). Professional responsibility: Lawyers, a case study. Fordham Law Review, 69, 817.
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Chambliss, E., & Wilkins, D. B. (2003). A new framework for law firm discipline. Georgetown Journal of Legal Ethics, 16, 335. Collins, J. C., & Porras, J. I. (1994). Built to last. New York: Harper Business. Cramton, R. C. (2002). Furthering justice by improving the adversary system and making lawyers more accountable. Fordham Law Review, 70, 1599. Donaldson, T. (2000). Are business managers ‘professionals’? Business Ethics Quarterly, 10(1), 83–94. Donaldson, T., & Dunfee, T. W. (1999). Ties that bind: A social contracts approach to business ethics. Cambridge, MA: Harvard Business School Press. Fisher, K. R. (2004). The higher calling: Regulation of lawyers post-Enron. University of Michigan Journal of Law Reform, 37, 1017. Fox, M. L. (2002). To tell or not to tell: Legal ethics and disclosure after Enron. Columbia Business Law Review, 2002, 867. Fraidin, S., & Mutterperl, L. B. (2003). Navigating the new realm of federal regulation of legal ethics. University of Cincinnati Law Review, 72, 609. Gerhart, P. M. (1994). The future of the legal profession. Vital speeches of the day, 60(11), 347. Glendon, M. A. (1994a). Legal ethics – worlds in collision. First Things, 41, 21–27. Glendon, M. A. (1994b). A nation under lawyers: How the crisis in the legal profession is transforming American society. Cambridge, MA: Harvard University Press. Gordon, J. C. (2003). Painting by numbers: ‘And, um, let’s have a black lawyer sit at our table’. Fordham Law Review, 71, 1257. Gordon, R. W. (1998). The ethical worlds of large-firm litigators: Preliminary observations. Fordham Law Review, 67, 709. Goyer, K. C. (2004). Nancy Temple’s duty: Professional responsibility and the Arthur Andersen verdict. Georgetown Journal of Legal Ethics, 18, 261. Greene, J. C. (2004). New regulations for lawyers: The SEC’s final rule for professional conduct in the wake of Sarbanes-Oxley: Challenges for foreign attorneys. Indiana International & Comparative Law Review, 14, 807. Griffith, S. J. (2003). Towards an ethical duty to market investors. Connecticut Law Review, 35, 1223. Hayden, P. T. (2003). Putting ethics to the (national standardized) test: Tracing the origins of the MPRE. Fordham Law Review, 71, 1299. Hazard, G. C., Jr. (1982). Legal ethics: Legal rules and professional aspirations. Cleveland State Law Review, 30, 571. Hazard, G. C., Jr. (2004). Lawyer for the Situation. Valparaiso University Law Review, 39, 377. Henning, P. J. (2004). Sarbanes-Oxley Act 307 and corporate counsel: Who better to prevent corporate crime? Buffalo Criminal Law Review, 8, 323. Higgins, S. E. (1999). Ethical rules of lawyering: An analysis of role-based reasoning from zealous advocacy to purposivism. Georgetown Journal of Legal Ethics, 12, 639. Hyatt, W. H., Jr. (2005). Diversity matters: Building a better lawyer. New Jersey Law Journal, (May 20). Joy, P. A. (2002). Making ethics opinions meaningful: Toward more effective regulation of lawyers’ conduct. Georgetown Journal of Legal Ethics, 15, 313. Kelly, M. J. (1999). Thinking about the business of practicing law. Vanderbilt Law Review, 52, 985. Kendall, J. (2003/2004). Accountants, attorneys, and Enron: An analysis of the debacle and implications for future corporate practice under the Sarbanes-Oxley Act. Regent University Law Review, 16, 459.
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Koniak, S. P. (2003). Corporate fraud: See, lawyers. Harvard Journal of Law & Public Policy, 26, 195. Kostat, P. C. (2004). Sarbanes-Oxley and changing the norms of corporate lawyering. Michigan State Law Review, 2004, 542. Kronman, A. T. (1999). Legal professionalism. Florida State University Law Review, 27, 1. Kruse, K. R. (2004). Lawyers should be lawyers, but what does that mean? A response to Aiken & Wizner and Smith. Washington University Journal of Law & Policy, 14, 49. Lande, J. (2003). Possibilities for collaborative law: Ethics and practice of lawyer disqualification and process control in a new model of lawyering. Ohio State Law Journal, 64, 1315. Lerner, A. M. (2004). Using our brains: What cognitive science and social psychology teach us about teaching law students to make ethical, professionally responsible, choices. Quinnipiac Law Review, 23, 643. Levine, S. J. (2003). Professionalism without parochialism: Julius Henry Cohen, Rabbi Nachman of Breslov, and the stories of two sons. Fordham Law Review, 71, 1339. Martyn, S. R. (1994). Visions of the eternal law firm: The future of law firm screens. South Carolina Law Review, 45, 937. McDonough, M. (2005). Demanding diversity: Corporate pressure is changing the racial mix at some law firms. ABA Journal, 91, 52. Mick, R. E. (2001). The federal prosecutors ethics act: Solution or revolution? Iowa Law Review, 86, 1251. Molot, J. T. (1998). How changes in the legal profession reflect changes in civil procedure. Virginia Law Review, 84(6), 955. Morgan, T. D. (2003). Sarbanes-Oxley: A complication, not a contribution, in the effort to improve corporate lawyers’ professional conduct. Georgetown Journal of Legal Ethics, 17, 1. Morin, L. A. (2004). Broken trust and divided loyalties: The paradox of confidentiality in corporate representation. University of the District of Columbia Law Review, 8, 233. Nesteruk, J. (1999). Commentary: A new role for legal scholarship in business ethics. American Business Law Journal, 36, 515. Nexon, P. J. (1994). The business of the law in the 1990s. South Carolina Law Review, 45, 1063. Pearce, R. G. (1995). The professionalism paradigm shift: Why discarding professional ideology will improve the conduct and reputation of the bar. New York University Law Review, 70, 1229. Peppet, S. R. (2005). Lawyers’ bargaining ethics, contract, and collaboration: The end of the legal profession and the beginning of professional pluralism. Iowa Law Review, 90, 475. Perlman, A. M. (2003). Toward a unified theory of professional regulation. Florida Law Review, 55, 977. Pilcher, M. (1999). ‘You’re killing independent George’: When professionalism and business worlds collide. Georgetown Journal of Legal Ethics, 12, 829. Radin, T. J. (2002). From legal imagination to realization: A legal foundation for stakeholder theory. In: M. Pava & P. Primeaux (Eds), Re-Imagining business ethics-meaningful solutions for a global economy (Vol. 4, pp. 31–49).Stamford, CT: JAI Press. Radin, T. J. (2004). Global codes of conduct: Role models that make sense. Business and Society Review, 109(4), 415–447. Regan, J. (2001). How about a firm where people actually want to work? A ‘professional’ law firm for the twenty-first century. Fordham Law Review, 69, 2693.
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Regan, M. C., Jr. (1999). Law firms, competition penalties, and the values of professionalism. Georgetown Journal of Legal Ethics, 13, 1. Schmitt, R. (2002). Lawyers pressed to report fraud under new law. Wall Street Journal, B1. Smith, A. (2003). Promoting justice through interdisciplinary teaching, practice, and scholarship the difference in criminal defense and the difference it makes. Washington University Journal of Law & Policy, 11, 83. Spaulding, N. W. (2003). Reinterpreting professional identity. Colorado Law Review, 74, 1. Stabile, S. J. (2004). Sarbanes-Oxley’s rules of professional responsibility viewed through a Sextonian lens. New York University Annual Survey of American Law, 60, 31. Stempel, J. W. (1999). The bankruptcy of a business paradigm for conceptualizing and regulating the legal profession. Florida State University Law Review, 27, 25. Stevenson, R.W. (2002). Corporate conduct: News analysis: Old business in new light. New York Times, p. A1. Temkin, B. R. (2004). Misrepresentation by omission in settlement negotiations: Should there be a silent safe harbor? Georgetown Journal of Legal Ethics, 18, 179. Wald, P. M. (1982). Commencement address, 1982. Catholic University Law Review, 32, 1. Wendel, W. B. (2001). Nonlegal regulation of the legal profession: Social norms in professional communities. Vanderbilt Law Review, 54(5), 1955.
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IN SEARCH OF THE COMPUTER ‘PROFESSIONAL’: AN AUSTRALIAN PERSPECTIVE Michael Schwartz INTRODUCTION With impeccable timing, literally just before the so-called dot.com boom went completely bust, the Australian Journal of Professional and Applied Ethics (July, 1999) dedicated a special issue to the topic of ‘‘computer ethics’’. The lead article in that issue was by the pioneering American computer ethicist, Terrell Ward Bynum, who edited one of the first books in the field of computer ethics (Bynum, 1985). Bynum’s 1999 article explained how what ‘‘is currently called ‘computer ethics’ was born in the Second World War’’ (Bynum, 1999, p. 1) along with the birth of the computer industry. According to Bynum (1999), the Allies need to rapidly sight their anti-aircraft artillery, given the increased speed of fighter planes, stimulated the birth of the modern computer industry. It is thus not historically insignificant that the acknowledged father of computing, Charles Babbage (1792–1871), was strongly supported by the Duke of Wellington who ‘‘could see the military point of calculating machines, especially for the artillery’’ (Johnson, 1991, p. 565). It is also worth noting that ‘‘there was no essential difference between (Babbage’s Analytical Engine) and the mainframe computers’’ (Johnson, 1991, p. 564). However, it was not Crisis and Opportunity in the Professions Research in Ethical Issues in Organizations, Volume 6, 85–100 Copyright r 2005 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 1529-2096/doi:10.1016/S1529-2096(05)06005-0
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until the mid-1960s that ‘‘computer technology had developed significantly and had become widely disseminated. As a result, important social/ethical consequences became manifest’’ (Bynum, 1999, p. 3) at that time. The first of these consequences was the fears of what could be done, both by government and industry, with this new technology. Hence, with regard to computer ethics ‘‘the decade of the 1970s brought sudden growth of public interest in privacy’’ (Bynum, 1999, p. 4); and Bynum attempted in his paper to explain how computer ethicists had addressed the issue of privacy. However, what is remarkable about Bynum’s 1999 article is what remains unexplained. For Bynum, although ‘‘the computer revolution is often described as ‘technological’, in reality it is fundamentally social and ethical’’ (Bynum, 1999, p. 17). And yet no explanation is provided as to why it might be perceived as ‘‘fundamentally social and ethical’’ other than that new social choices might arise. Indeed, while it might be asserted that ‘‘a typical problem in computer ethics arises because there is a policy vacuum about how computer technology should be used’’ (Bynum, 1999, p. 9) the exact same claim could be said about many products. Some of these might have been in existence for centuries, such as, for example various medications. Furthermore, the implementation of computer technology is reliant on a computer professional but throughout Bynum’s article there is scarcely a mention of such individuals. Indeed, basically the only mention is of a computer scientist Donn Parker, who in the 1960s ‘‘collected examples of unethical and illegal uses of computers by computer professionals’’ (Bynum, 1999, p. 4). Parker sought to curb such behaviour by ‘‘spearhead(ing) the development of a code of professional conduct for members of the Association for Computing Machinery’’ (Bynum, 1999, p. 4) which was adopted in 1973. Bynum’s mention of this code of conduct is significant. This is because according to Bynum, with very limited exception, ‘‘computer professionals typically have viewed computer ethics as a field of professional ethics, primarily concerned with codes of conduct and standards of good practice, rather than as a field where traditional philosophical theories are applied’’ (Bynum, 1999, p. 12). This of course assumes the existence of such a profession, and acceptance by those in that profession of their professional status and all that that implies, as I will discuss later. Other articles in that issue raised similar themes to those raised by Bynum, and in turn join Bynum in very much ignoring the existence of the computer professional. The Dutch computer ethicist, Jeroen van den Hoven, much like Bynum (1999), saw privacy as the pivotal issue. Privacy, for van den Hoven, ‘‘lies at the heart of an ongoing debateybetween liberalists and communitarians over the question how to balance individual rights and collective
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goods. The privacy issue is concerned more specifically withythe claims of those who want to limit the availability of personal information in order to protect individuals and the claims of those who want to make information about individuals available in order to benefit the community’’ (van den Hoven, 1999, p. 30). van den Hoven (1999) notes Michael Walzer’s concerns as to the freerider problems associated with liberalism. Conversely, the adoption of computer technology allows both those in the public and private sector ‘‘to pursue the communitarian dream of perfect free-riderlessness’’ (van den Hoven, 1999, p. 31). Indeed, van den Hoven highlights Walzer’s objections to John Rawls’ ‘‘conception of primary goods and universal rules of distributive justice’’ (van den Hoven, 1999, p. 35). Here the objection is that we cannot determine how just a distribution is without understanding the importance of that good to its recipients. Thus, any ‘‘violation of privacy is often more adequately construed as the morally inappropriate transfer of data across the boundaries of what we intuitively think of as separate ‘spheres of justice’’’ (van den Hoven, 1999, p. 37). In presenting privacy violations as a conflict between a liberalist vision and a communitarian vision, van den Hoven is revoking Bynum’s abovementioned restrictions on computer ethics to an area ‘‘primarily concerned with codes of conduct and standards of good practice’’ (1999, p. 12). However, he is simultaneously appealing to the larger society to consider the communitarian alternative. Computer professionals here do not exist except as a part of that larger society. Nor do they substantially exist in any of the other four papers in that special issue on computer ethics. All that exist are the ‘‘ethical problems arising from computer technology’’ (Weckert, 1999, p. iii). Such problems impact upon society. They also impact upon individuals. But they seemingly arise independently from a computer professional. The questions must thus arise: whence the computer professionals?
THE AUSTRALIAN EXPERIENCE OF COMPUTER PROFESSIONALISM If Bynum (1999) is correct in stating that the computer industry emerged during the Second World War, then the effects of that industry were soon felt in Australia. Evidence of this is that The First Australian Computer Conference was held in 1951 at the University of Sydney with 186 participants (Pearcey, 1994). Furthermore, within little over one decade the
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Australian computer industry was to face an ethical issue that would, in the future, grow in significance. This was because in 1966 an Australian corporation, Automatic Totalisators, developed a computer system for the New York Racing Association. In doing so they became ‘‘the first in the world to apply the power of computers to automatic betting systems’’ (Broomham, 1994, p. 31). It is thus intriguing to reflect upon the recent Australian film, ‘Dirty Deeds’ (www.dirtydeedsthemovie.com) which provides a completely different view of this past. In this film, which is set in the mid-1960s, we see local Australian crooks threatened by powerful American gangsters intent upon encroaching on their Australian turf largely by means of their (then) American state-of-the-art betting systems. Again in that movie, while American and Australian mobsters slug it out, any computer professionals, much in keeping with all of the above, remain completely invisible. Of course, if a part of being a professional is having professional knowledge, then in the strictest sense of the word there were no Australian computer professionals at that time. This is because it was only in 1975 that the University of Melbourne along with the University of Tasmania ‘‘became the first in Australia to offer a full 3-year stream of computer science’’ (Sale, 1994, p. 152). Despite that individuals throughout Australia did study computer courses prior to 1975, work in the computer industry, and consider themselves computer professionals. Clear evidence of this was the existence of the various state computer societies, with the formation of the Victorian Computer Society being announced at a public lecture in Melbourne in 1960. Intriguingly enough the public lecture was ‘Computers in Russia’ ‘‘delivered by Dr. A. D. Smirnov from the Computing Centre, Academy of Sciences, Moscow’’ (Murton, 1994, p. 213). Here, the intrigue exists due to this country existing at that time in the shadow of the infamous Petrov Affair which had occurred barely 5 years before, and which had dominated the recent Australian federal election. The Petrov Affair saw the Australian government accusing specific Canberra-based Russian diplomats of actively spying upon Australia. Thus, if the threat to privacy was an issue that would be associated with the diffusion of computers, the choice of a lecture about it in a country accused of engaging in illegal clandestine activities within Australia leaves at least some room for speculation as to its suitability. Perhaps the organisers of the lecture merely had a sense of humour. In any event such lectures motivated enough interest at state level for the various state computer societies to understand the advantages of forming a national body. This they did in 1966 when the Australian Computer Society
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(ACS) was founded with membership to be for those who could provide ‘‘evidence of professional competence’’ (Rutledge, 1994, p. 199). The question thus presents itself as to whether professional competence bestows professional status? Indeed, the question is intensified by the fact that while that was the objective some members then ‘‘had no computer training at all’’ (Rutledge, 1994, p. 201). Admittedly, this was a small minority of the members. And the expectation then must have been that such circumstances would change. However, a writer discussing the downturn in the Australian computer industry in the early 1990s warned that ‘‘no longer is the computing professional the only one qualified to control the processing of data in the workplace. There are now more practitionersyperhaps in the ratio of ten to one, than professionals with computer science degrees’’ (De Ferranti, 1994, p. 73). Furthermore, over the following years the national executive of the ACS became convinced that in at least one respect their society was unable to assist its members. This was with the ACS unable to ‘‘become a union because of its constitution y (its executive) y favoured the formation of an appropriate union to protect the interests (of) the sort of people who were members of the ACS’’ (Goldsworthy, 1994, p. 176). This led in 1975 to the formation of the Association of Computer Professionals of Australia (ACPA), with the President of the ACS) also the President of the ACPA. Membership of the latter organisation was restricted to ACS members. Membership was thus restricted to ‘‘a group with formal standards of knowledge and specified practical experience who were required to abide by a code of ethics and who worked in identifiable callings’’ (Goldsworthy, 1994, p. 177). However, much of the above quoted claim does seem problematic. Obviously not all in this group had acquired equivalent qualifications. This must have been so following the argument that as qualifications ‘‘in an embryonic industry excluded many competent professionalsy ACPA amended its eligibility requirement’’ (Goldsworthy, 1994, p. 177). The ACS and the ACPA were not in competition. Rather, ‘‘a computer professional joins the ACS to further his or her professional interests, enhance skills, and engage in learned discussion. The same computer professional joins a union to protect his or her industrial interests, salary scale, and conditions of employment’’ (Goldsworthy, 1994, p. 179). One might however speculate upon the very meaning of a professional. For Margaret Coady it is ‘‘the possession of a body of knowledge, the contribution of a service to the public, the possession of a code of ethics, and the existence of a body of peers’’ (Coady, 1997, p. 73). By such standards the status of socalled computer professionals as professionals seems debatable.
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Much of the above clearly indicates that computer professionals do not share a common body of knowledge. That is not disputing that knowledge exists, but there are different types of knowledge. My veterinary surgeon has done much for my Bulldog’s teeth. My dentist has done much for mine. And yet they are not seen to share a body of knowledge. Admittedly their knowledge overlaps but it is different. Again while vets and dentists serve the public, computer professionals serve their employers. If that was not so the vets and the dentists would also have unions to protect their ‘‘interests, salary scale, and conditions of employment’’ (Goldsworthy, 1994, p. 179). Given that they are mostly self-employed this is not necessary. They individually negotiate that each working day with that public which they serve. And because they are in such circumstances they have a body of peers with expectations of certain professional standards lest the standing of the profession is harmed. Computer professionals have no such peers. They only have their employers, who might fire them for unsatisfactory performance. Indeed, in terms of being a professional all that those computer professionals who belong to the ACS have, is the possession of a code of ethics. This ‘‘Code of Ethics is a lynch-pin of the ACS and breaches can be examined through a standing disciplinary committee’’ (Underwood, 1994, p. 293). This seems much in keeping with the situation facing Australian medical practitioners who can be disciplined through a standing disciplinary committee of the Medical Practitioners Board. There is however a very real difference. The Medical Practitioners Board is legally empowered to debar a practitioner from practice should the practitioner be found to have seriously transgressed their ethical code. However, ACS members ‘‘who breach the code can escape from its ambit simply by resigning from the Society’’ (Underwood, 1994, p. 293). The seriousness of this shortcoming is underlined by the fact that ‘‘the most optimistic figure that could be estimated of the percentage of those practising in the Australian computing industry who were ACS members was thirty percent’’ (Underwood, 1994, p. 292). Australian medical practitioners face a very different situation. They have to apply each year to the Medical Practitioners Board for membership; and if their annual membership is not renewed they can no longer practice medicine. While the above-described circumstances might lead some to believe that computer professionals are able to easily escape their ethical transgressions fiction writers suggest otherwise. After all, for every medical doctor we read of, with ‘‘his utterly hopeless expression as he stood condemned by this august body of his fellowsy(to)yan adverse judgement, erasure from the register’’ (Cronin, 1937, p. 431) we can find computer professionals who
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suffer far more. Writers seem to find no problem in presenting unethical computer professionals, as employed by a Hamburg bank, and executed by hirelings of their irate employer who ‘‘hindered identification by cutting off and taking away the hands and heads’’ (Deighton, 1981, p. 217). If I did claim earlier that such computer professionals were invisible, these killers seemed in cahoots with this claim, by eradicating much of the existing evidence of them. And, if as Nietzsche claimed (Bridgwater, 1978), fiction is a lie through which one might discover truth, then that truth might be that a valid profession provides some form of security. I would thus like to attempt to present Australian computer professionals as perhaps a different sort of professional.
COMPUTER PROFESSIONALS AS ‘OTHER’ PROFESSIONALS An article written by Donaldson (2000) is instructive with regard to computer professionals status as employees, as in that article he attempted to argue that business managers, although likewise employees, are indeed professionals. In doing so he acknowledges that professionals employed by a business ‘‘are not slow to recognise the tension that their status as employees brings’’ (Donaldson, 2000, p. 85). Although, to a degree paradoxically, lacking the ‘‘relevant knowledge, management is powerless to control professionals directly’’ (Donaldson, 2000, p. 87). Donaldson thus exposes ‘‘the business/professional values collision’’ (Donaldson, 2000, p. 87) and the questions that this raises for our society. With regard to those employed in business, Donaldson distinguishes between all business practitioners and business managers. He argues that only the latter ‘‘who are formally trained in the skills designed to effect successful management’’ (Donaldson, 2000, p. 89), such as an MBA or an undergraduate business degree, could be considered as professionals. This immediately limits the universal applicability of his arguments given that the French continue to recruit their senior business management from civil servants (Cassis, 1997). Indeed, both in France and in Germany a small minority of such business management ‘‘active in 1989 had been trained in business and management’’ (Cassis, 1997, p. 139). Nonetheless, I am happy to accept that limitation: especially as I intend later to return to the difference between the Anglo-American experience and the European experience of professionalism.
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Indeed, the specific nature of the actual training is perhaps meaningless if ‘‘the business manager’s skills are those, again, that effect successful management’’ (Donaldson, 2000, p. 90). Although, as Donaldson (2000) acknowledges, that in turn depends on what is accepted as being successful which implies some acceptance of the business firm having some larger purpose. Thus ‘‘the lynch-pin issue for whether the manager is or is not a ‘professional’ turns on whether the knowledge of the practitioner is connected to a ‘broader good’’’ (Donaldson, 2000, p. 90). No doubt the same might be argued for the computer professional employed by a business firm. Both would of course depend on the validity of there being some ‘broader good’ and the tenacity of the linkage of those professionals to that good. For Donaldson (2000) the very reason ‘‘why we have professions at all’’ (Donaldson, 2000, p. 88) is directly related to such a ‘broader good’ as ‘‘from the standpoint of the interests of society, a profession constitutes an institution designed to achieve specific social goods’’ (Donaldson, 2000, p. 88). Furthermore, by following social contract reasoning Donaldson illustrates that ‘‘a profession from this perspective constitutes an efficiency strategy for achieving whenever aspects of a necessary social good is encompassed by the activity of the profession’’ (Donaldson, 2000, p. 89). Donaldson seeks to verify this by referring to the medical profession and concludes that ‘‘without the professional institution of medicine, health care delivery would be less efficient’’ (Donaldson, 2000, p. 89). All of this seems reliant on the above ‘whenever’. For, while Donaldson might find the evidence to support such a ‘whenever’ with the medical profession, others do not. Following Alexandra (2001) professions enjoy privileges. He thus questions whether ‘‘the achievement and retention of such privileges (are) the end of professional organisation’’yor whether theyy‘‘are not ends in themselves, but rather necessary means to enable them to carry out the socially vital tasks that define them’’ (Alexandra, 2001, p. 1). With regard to the Australian medical profession others experience no such a dilemma. Rather, they believe the Australian medical profession successfully restricts the supply of medical practitioners so as to boost the income level of those in the profession (Lamont, 2001). And the result is not that the profession thus contributes to an increase in the efficiency of health care delivery, as Donaldson (2000) would have it, but to a decrease in that efficiency. Lamont (2001) lists some of those ‘‘many disbenefits flowing from the restrictions of supply of doctors’’ (Lamont, 2001, p. 24) such as less access for the poor due to those higher fees. The suggestion could be made that this might be unique to Australia, or a fairly recent development. However, that could be refuted by again invoking
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Nietzsche’s usage of fiction. There, if we returned to the fictitious medical practitioner I presented earlier as being threatened with removal from the medical registrar, we will find that he is charged with aiding a man outside the medical profession in discharging medical procedures on tuberculosis victims. This doctor seeks to defend himself by mentioning the contribution to medicine by numerous individuals outside the profession; such as that ‘‘Louis Pasteur, the greatest figure of all in scientific medicine, was not a doctor’’ (Cronin, 1937, p. 440). This doctor concludes that ‘‘if we go on trying to make out that everything is wrong outside the profession and everything is right within, it means the death of scientific progress. We will just turn into a tight little trade protection society’’ (Cronin, 1937, p. 441). That specific threat existed then, and it continues to exist today. Donaldson (2000) described a social good as being encompassed by the profession, and highlighted the medical profession to illustrate this, claiming its existence led to increased efficiency in the delivery of this social good. However, there must be ongoing tension between the trade-offs involved in the delivery of that social good and the privileges associated with a continual monopoly over that social good. With a social good as strictly defined as medicine such tensions are going to be far easier to identify then those that will exist in business. Donaldson (2000) does not thus, I believe, make a completely watertight case that business managers might be conceived as professionals, and therefore his arguments seemingly provide little insight into how computer professionals might be conceived as professionals. However, an alternative does exist, and it is apparent due to a part of what Donaldson (2000) states. Coady (1997), whose one explanation of professionalism I discussed earlier, has enlarged upon that. Here being conceived as a professional is allied to her above explanation of what constitutes a professional, but it also notes that: 1. 2. 3. 4.
Trust is central to the relationship between professional and client. The client of a professional is particularly vulnerable. Professionals supply not just the wants but the needs of clients. The good being supplied by the professional has peculiar characteristics; it is a particularly important good and/or it cannot be defined by the client alone(Coady, 1997, p. 73).
All of that is germane to the status of the computer professional as a professional. Certainly most computer professionals are employees of an organisation, whereas those vets and dentists I described are in the main self-employed. However, ignoring Donaldson’s (2000) arguments for ‘efficiency’ but noting his arguments for a ‘broader good’, it can be argued
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that there are those employed by an organisation who while employed by that organisation are simultaneously committed to some ‘broader good’ beyond the objectives of that organisation. Nurses and teachers, for example, are usually employees. But they are seen to have a professional duty that goes beyond that of their employer, which is why they are perceived to be professionals. Computer professionals are also, very often, in that exact same situation. In all these cases there is a ‘‘disparity of knowledge’’ (Coady, 1997, p. 75) and thus ‘‘trust is central to the relationship’’ (Coady, 1997, p. 73). Examples exist of computer professionals employed by organisations with specific expectations of them as employees regarding the data processing needs of a customer, while they feel ‘‘a stronger duty to a client who is trusting (their) professional judgement’’ (Langford, 2001, p. 45). And, precisely because there is such a ‘‘disparity of knowledge’’ the client is ‘vulnerable’ (Coady, 1997, p. 73). Here if the computer professionals gained the contract sought by their employer, but knew that there system was ‘‘inadequatey(then)ythe consequences could well be serious’’ (Langford, 2001, p. 45) for the client. The computer professionals are thus in a situation defined by trust and vulnerability. And where a customer does find that the purchased system is inadequate and problems emerge, then the behaviour of the computer professional is seen as unprofessional. Furthermore, such a situation can only arise because ‘‘the users knew little of technical realities’’ (Langford, 2001, p. 45). The good cannot thus ‘‘be defined by the client alone’’ (Coady, 1997, p. 73). As to whether the actual good supplied by the computer professional is a want or a need, the same differentiation will exist as with any profession. I might want my lawyer to draft a will that allows me to leave my estate to the bulldog, and not have the will overturned by my wife and children. But then again I might need my lawyer to keep me out of prison when that same bulldog savages the neighbour. Likewise, I might want a computer system that ensures that fellow bulldog owners are collectively grouped in my email address book. But I do need a computer system that is able to make such email groupings. At a certain point then, computer professionals cannot merely supply wants, but have to also satisfy specific needs. In recent years there has been major growth in the sale of educational ‘‘software for infants from 6 months to 2 years of age’’ (Elkind, 2001, p. 102). The success of these products, with in 1999 alone, sales of ‘‘770,000 copies of software for infants’’yhas led toy‘‘a lot of controversy about the efficacy and value of these programs’’ (Elkind, 2001, p. 103). With regard to this controversy, it is significant that no one is asking what anyone could want with such a product. Rather, what is being disputed is whether anyone could have a
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need for such a product. Again, the distinction between needs and wants is being made. Thus, using Coady’s (1997) explanation, computer professionals can be classed as genuine professionals notwithstanding that as professionals they are often employed by others. Also, intriguingly enough, this distinction between the need or the want for a good returns us to van den Hoven (1999) who was mentioned earlier in this article. van den Hoven (1999) highlighted Walzer’s objection to Rawl’s conception of a just distribution as being that we cannot determine how just a distribution is without understanding the importance of the good to its recipient. Ultimately needs must have a higher priority than wants. We could project that to signify that outside the professions wants could be satisfied by means of the market. However, needs then would exist separately, and professionals would distribute such goods utilising some non-market mechanism. For most such goods, and these would include medicine, education, and the justice system – in Australia at least – they are distributed outside the market. However, computer products are distributed via the market by firms that employ computer professionals.
THE PROBLEM WITH COMPUTER PROFESSIONALS AS PROFESSIONALS Nurses, teachers, and computer professionals, among others, exist as professionals employed by others. However, nurses and teachers exist in professions committed to satisfying specific needs. And it is the satisfaction of those specific needs that define their employment as professionals. Melbourne nurses were on strike earlier this year in protest against nurse to hospitalised patient ratios, which they thought made it impossible for them to discharge their professional duty (2004). In turn, Melbourne teachers have been on strike for similar reasons. But computer professionals exist in firms, which distribute products via the market. As such little here defines their professional status that might be a problem as computer professionals increasingly perceive their professional status solely through those firms that employ them. This is perhaps proven by their low membership of their professional society, the ACS, as was discussed earlier in this paper. Anecdotally, what occurred recently when a new email system was installed does not seem insignificant. This system contained not merely carbon copies but also blind copies. A friend at that workplace recounts how he asked their computer professionals if blind copies did not have privacy implications contrary to their professional code. He states that he was told in reply that
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they could not comment on their professional code but that they could comment on the corporate code, and that it presented no problems for the latter. Such computer professionals do exist facing both codes, and if they choose to uphold the corporate code rather then the professional code they are seeking to be professionals through the corporation. After all such computer professionals would not dispute the fact that in terms of Coady’s (1997) explanation of what constitutes a professional they are professionals. But with regard to their professional status something is different. Earlier, when discussing Donaldson’s (2000) explanation of the businessman as a professional, I mentioned the distinction between the Anglo-American concept of a professional, and the European concept of a professional. Such a distinction will do much to explain the situation of the computer professional. As Alexandra (2001) observed earlier in this paper, the professions enjoy the privilege of autonomy so as to discharge certain responsibilities. As such, within Anglo-American societies, such professional associations exist as intermediate institutions within the larger society. Among others the French aristocrat, Alexis de Tocqueville, commented upon the advantages of this in early nineteenth century America (Ehrenberg, 1999). However, the European experience of professionals is different. In discussing that European experience I will restrict myself to Germany. Whatever the consequences thereof for most of the time since de Tocqueville’s comment on America, Germany has been the dominant European power. In recent times much has appeared on the German experience of professionalization (Cocks & Jarausch, 1990; McClelland, 1991). According to that history, in Germany the rise of the modern professions during the nineteenth century was ‘‘stimulated by the enlightened absolutist state’s desire to improve public administration by upgrading training’’ (Cocks & Jarausch, 1990, p. 4). There, professions such as engineers, chemists, and architects failed ‘‘to establish a legally protected market monopoly as a result of the resistance of their employersy(which)yleft them in a psychological and political state of suspension, unsure of their own identity and social role’’ (Cocks & Jarausch, 1990, p. 5). It would not be unfair to suggest that Australian computer professionals share such circumstances as a result of their status as employees. However, the German professions had a far ‘‘greater dependence on the state’’ (Cocks & Jarausch, 1990, p. 7) than their Anglo-American counterparts. And thus ultimately when faced with the onslaught of the totalitarian state ‘‘not only lost many of their prerogatives but also betrayed their higher mission’’ (Cocks & Jarausch, 1990, p. 7). Cocks and Jarausch thus conclude that ‘‘the drastic self-corruption of expertise in the Third
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Reich suggests that moral ambiguity might be inherent in modern professionalism in general’’ (1990, p. 8). While that is worthy of serious consideration, equally so is the ‘‘greater dependence on the state’’ of those German professionals. For while Coady notes the observation that ‘‘the professions in Nazi Germany were one of the few remaining repositories of moral value’’ (Coady, 1997, p. 72), others dispute that. Barkai writes how in 1933 when the Nazis came to power the ‘‘first spontaneous anti-semitic boycott actions were initiated specifically by the two professional groups’’ (Barkai, 1989, p. 16). The groups he refers to are the lawyers and the medical doctors. With regard to the latter group the first protest as to the treatment of German Jewish medical doctors by a medical professional was that made in March 1933 by Lord Horder, the great clinician who included among his patients the British royal family. Lord Horder protested in a letter to The Times, a newspaper noted for the commitment of its editor to appeasement (Manchester, 1994). Perhaps, most tellingly, Lord Horder’s protest was not concerned with the treatment of German Jewish doctors per se, but what such treatment of one segment of the profession meant for the future of that profession as a whole (Gregory, 1983). In writing that letter Lord Horder was informed by an Anglo-American understanding of a profession, but he seemingly without realising it was writing about those in Central Europe with a very different concept of a profession. That those in Central Europe had a different concept was due to their professionals traditionally being enthralled to the state. Australian computer professionals while not enthralled to the state are – in a very similar manner – enthralled to the organisations which employ them, and this likewise could have societal implications which need to be considered. Their situation might best be illustrated by referring to that same butler, Mr. Stevens, whom Badaracco (1997) referred to in his book, Defining Moments. Stevens is the major character in the novel, The Remains of the Day, which was written by Kazuo Ishiguro (1989); and he spends much time in that novel deliberating upon what professionally defines a truly excellent butler. Following Stevens such professional excellence could only be attained ‘‘by devoting our attention to providing the best possible service to those great gentlemen in whose hands the destiny of civilization truly lies’’ (Ishiguro, 1989, p. 199). As to the validity of the greatness of ‘‘those great gentlemen’’, Stevens warns that ‘‘it is, in practice, simply not possible to adopt such a critical attitude towards an employer and at the same time provide good service’’ (Ishiguro, 1989, p. 200). Stevens view, however, is very much at odds with that of his fellow fictional manservant, Jeeves, whom the writer P. G. Wodehouse created to serve Betram
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Wooster. For while Stevens might insist upon the necessity of serving his master, Jeeves differs somewhat. Following Jeeves, professional excellence entails using his professional expertise to – in Wodehouse parlance – keep his master from making an ass of himself (see for example Wodehouse, 1991). If we refer to Coady’s (1997) above explanation of a professional, and particularly note points 3 and 4, we must realise that it is only Jeeves’ view which can conform with this explanation. Unfortunately, little evidence exists of Australian computer professionals realising this. Most of them are seemingly comfortable with Stevens’ concept of uncritical service. This presents certain societal quandaries. While Australian computer professionals did not really exist 25 years ago, today they represent a major occupational group. Their autonomy has not been undermined during this period as from the outset they enjoyed little autonomy; but while deprived of such autonomy the role of the profession has expanded rapidly while all this time being essentially responsible to their corporate employers. And no response has been forthcoming from the profession as to this situation. However, if we do believe there are advantages for a society in having independent professions then this situation stands to harm the public. The reason for this is that as the most recent profession, computer professionals are likely to be accepted by Australians as being at the vanguard of the professions. Their situation is thus soon going to be replicated by other professions. Already Australians are witnessing independent general practitioners selling their medical practices to publicly listed companies, and continuing to discharge their professional duties as employees of those corporations. No doubt similar examples will soon exist elsewhere. As such the situation of the Australian computer professionals might herald the commodification of much of our professional services; and as such they present a threat to our concept of community. Indeed, one can only hope they do, because the only other alternative is that they represent the imminent future of our community.
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Broomham, R. (1994). Computers enter the race! Computerised automatic totalisators. In: J. M. Bennett, R. Broomham, P. M. Murton, T. Pearcey & R. W. Rutledge (Eds), Computing in Australia: The development of a profession (pp. 31–32). Sydney: Hale and Iremonger. Bynum, T. W. (Ed.) (1985). Computers and ethics. London: Basil Blackwell. Bynum, T. W. (1999). The development of computer ethics as a philosophical field of study. Australian Journal of Professional and Applied Ethics, 1(July), 1–29. Cassis, Y. (1997). Big business: The European experience in the twentieth century. Oxford: Oxford University Press. Coady, M. (1997). Just how ethical should professionals be? Proceedings of the Third Annual Conference of the Australian Association for Professional and Applied Ethics Wagga Wagga October 1996, pp. 72–78. Cocks, G., & Jarausch, K. H. (Eds) (1990). German professions, 1800–1950. Oxford: Oxford University Press. Cronin, A. J. (1937). The citadel. London: Victor Gollancz Ltd. De Ferranti, B. (1994). The era of computing development: An individual view. In: J. M. Bennett, R. Broomham, P. M. Murton, T. Pearcey & R. W. Rutledge (Eds), Computing in Australia: The development of a profession (pp. 65–74). Sydney: Hale and Iremonger. Deighton, L. (1981). XPD. London: Book Club Associates. Donaldson, T. (2000). Are business managers ‘‘professionals’’? Business Ethics Quarterly, 10, 83–94. Ehrenberg, J. (1999). Civil society: The critical history of an idea. New York: New York University Press. Elkind, D. (2001). The hurried child. Cambridge: Da Capo Press. Goldsworthy, A. W. (1994). Unionism and the computer professional. In: J. M. Bennett, R. Broomham, P. M. Murton, T. Pearcey & R. W. Rutledge (Eds), Computing in Australia: The development of a profession (pp. 175–182). Sydney: Hale and Iremonger. Gregory, K. (Ed.) (1983). The first cuckoo: A selection of the most witty, amusing and memorable letter to The Times 1900–1980. London: Unwin Paperbacks. Ishiguro, K. (1989). The remains of the day. London: Faber and Faber. Johnson, P. (1991). The birth of the modern: World society 1815–1830. London: Weidenfeld and Nicolson. Lamont, J. (2001). The ethics of doctor supply restriction in Australia. Australian Journal of Professional and Applied Ethics, 3, 22–39. Langford, D. (2001). Practical computer ethics. Melbourne: Swinburne Press. Manchester, W. (1994). The caged lion: Winston Spencer Churchill 1932–1940. London: Abacus. McClelland, C. E. (1991). The German experience of professionalization: Modern learned professions and their organizations from the early nineteenth century to the Hitler era. New York: Cambridge University Press. Murton, P. M. (1994). Victorian Branch. In: J. M. Bennett, R. Broomham, P. M. Murton, T. Pearcey & R. W. Rutledge (Eds), Computing in Australia: The development of a profession (pp. 213–220). Sydney: Hale and Iremonger. Pearcey, T. (1994). Australia enters the computer age. In: J. M. Bennett, R. Broomham, P. M. Murton, T. Pearcey & R. W. Rutledge (Eds), Computing in Australia: The development of a profession (pp. 15–30). Sydney: Hale and Iremonger.
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Rutledge, R. W. (1994). The Australian Computer Society, a sketch. In: J. M. Bennett, R. Broomham, P. M. Murton, T. Pearcey & R. W. Rutledge (Eds), Computing in Australia: The development of a profession (pp. 199–207). Sydney: Hale and Iremonger. Sale, A. (1994). Computer science teaching in Australia. In: J. M. Bennett, R. Broomham, P. M. Murton, T. Pearcey & R. W. Rutledge (Eds), Computing in Australia: The development of a profession (pp. 151–154). Sydney: Hale and Iremonger. Underwood, A. (1994). ACS: The future. In: J. M. Bennett, R. Broomham, P. M. Murton, T. Pearcey & R. W. Rutledge (Eds), Computing in Australia: The development of a profession (pp. 291–294). Sydney: Hale and Iremonger. van den Hoven, J. (1999). Privacy and the varieties of informational wrongdoing. Australian Journal of Professional and Applied Ethics, 1(July), 30–43. Weckert, J. (1999). Guest editorial: Computer ethics. Australian Journal of Professional and Applied Ethics, 1(July), iii. Wodehouse, P. G. (1991). Thank you, Jeeves. London: Vintage.
FROM MECHANICAL TO MEANINGFUL SOLUTIONS IN THE ACCOUNTING PROFESSION Moses L. Pava It is already a familiar story. The Securities and Exchange Commission (SEC), the United States Justice Department, and the New York State attorney general’s office are investigating a potential financial accounting scandal at a major US corporation. Once again, it is the lead article in the Wall Street Journal (March 28, 2005). The SEC has issued subpoenas to several senior executives to determine whether or not questionable transactions were used to improperly bolster the company’s financial position. The company’s stock price has plummeted nearly 25% in less than 2 months on the news of a possible scandal. A long time and beloved CEO has been forced to resign. It has been alleged that as many as 30 top executives at the company have been involved in these questionable transactions. This time it is AIG, one of the biggest insurers in the world. The CEO is Maurice R. ‘‘Hank’’ Greenberg. And, among other accusations, the company has been accused of artificially inflating premium growth and claims reserves. The media is beginning to ask tough question about the company’s auditor, PricewaterhouseCoopers, and its long-time connection to the company. In fact, Howard I. Smith, the former chief financial officer of AIG who was fired for refusing to cooperate with investigators, worked for the
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auditing firm for 19 years and had been the head partner in the New York office of Coopers & Lybrand’s New York insurance practice (Cooper & Lybrand was a predecessor of PwC) before coming to work at AIG (BusinessWeek, April 11, 2005). While it may be the case that Ronen and Cherny (2003) were correct when they wrote in The CPA Journal that ‘‘the recent spate of ‘audit failures’ is not unusual when viewed over the last 50 years,’’ this is not the conclusion reached here. The number, magnitude, and impact of recent audit and accounting failures suggest to most other observers that the accounting profession can at best be described as in a state of disarray. Less kind critics believe that the accounting profession is in crisis. Consider the following items: Item 1: For most of its history, Arthur Andersen was considered one of the leading accounting firms in the world, enjoying a well-earned reputation for honesty, no-nonsense precision, and a degree of professionalism unmatched in the field. Today, this accounting firm no longer exists. Accused of colluding with Enron’s management, and of shredding important documents related to the audit, the federal government indicted Andersen on criminal charges. This move, on the part of the Justice Department, was unprecedented. Item 2: During the period between 1997 and 2002, the GAO reports that almost 10% of companies listed on the New York Stock Exchange, NASDAQ, and the American Stock Exchange restated their financial statements. In every case, the previously released financial statements had been audited by a Certified Public Accountant. The SEC considers such restatements as ‘‘audit failures.’’ In 2004, the number of restatements for annual audited statements reached a record high of 253. The leading causes of these restatements include revenue recognition, equity accounting, reserves, accruals, and contingencies. (See www.huronconsultinggroup.com for more details.) Item 3: A partial list of recent accounting and audit failures now includes the following well-known firms sorted by auditor: Andersen – CMS, Cornell, Dynergy, Enron, Global Crossing, Halliburton, Martha Stewart, Omnimedia, Peregrine, Qwest, Sunbeam, Waste Management, WorldCom; Deloitte & Touche – Adelphia, AES, Cendant, Duke, El Pas, Merrill Lynch, Reliant, Rite Aid; Ernst & Young – AOL Time Warner, Dollar General, PNC; KPMG – Citigroup, CA, GE, IM Clone, Xerox; PricewaterhouseCoopers – Bristol Myers, HPL, JP Morgan chase, Kmart, Lucent, MicroStgrategy, Phar-Mor, Tyco; Coopers and Lybrand – Network Associates; Gutierrez & Co. – Vivendi; Grant Thornton – Paramalat.
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Item 4: There is ample anecdotal and statistical evidence that indicates many corporations engage in earnings management, the process of manipulating reported earnings in a way that portrays a company more favorably than the underlying economic conditions of the company warrant. Here is how Paul Healy and James Whalen (1999) summarized some of the empirical findings related to earnings management in their exhaustive review of the academic accounting literature. These findings indicate that there is a higher-than-expected frequency of firms with slightly positive earnings (or earnings changes) and a lower-than-expected frequency of firms with slightly negative earnings or (earnings changes). This evidence suggests that the frequency of earnings management is relatively high among the subset of firms confronted with reporting losses. In summary, these tests provide convincing evidence that some firms do mange earnings when they anticipate reporting a loss, reporting an earnings decline, or falling short of investors’ expectations (emphasis added).
Although the studies reviewed by Healy and Whalen do not identify specifically how the earnings management process works, nor do they indicate the magnitude of the earnings management, these studies do provide prima facie evidence that managers, with accountants’ and auditors’ approval, are purposely distorting the communications process in a biased way that favors their own company. Item 5: More broadly, there is a growing lack of confidence in the accounting profession among investors, creditors, and the general public. This concern drove Congress to pass overwhelmingly the Sarbanes-Oxley legislation, one of the most significant regulatory changes in auditing, accounting, and disclosure rules since the Securities and Exchanges Acts of 1933 and 1934. As a centerpiece to this legislation, Congress established the Public Company Accounting Oversight Board (PCOAB). The PCOAB replaces the accounting profession’s own Public Oversight Board. As Yuthas, Dillard, and Rogers (2004) have noted, ‘‘In a move unparalleled in any other profession, public accounting lost its right to self governance’’ (emphasis added). Or, as Douglas Carmichael, the chief auditor at PCOAB, has stated, ‘‘The Act removed from auditors the ability to exclusively interpret their role in society. That task is now in the hands of the PCAOB’’ (2004). Crain’s New York Business recently reported that there is a hiring boom in accounting. ‘‘Two years after passage of the Sarbanes-Oxley Act designed to clean up corporate governance–and 18 months after its first provisions took effect, accounting firms are galloping to catch up with demand for their services. Industry executives predict that the hiring surge that began nearly two years ago will continue at least through 2005’’ (September 27, 2004). While there is no question that this flood of new hiring is good for
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accounting graduates looking for their first job, the profession should be careful in how it interprets this current surge in demand for accounting services. To declare the accounting crisis over because of the current boom in hiring is, at best, premature and shortsighted. The rest of this paper is divided into three sections. In the next section, the paper examines the multiple and interrelated causes for the current crisis in the accounting profession. Next, the paper identifies and examines some of the solutions that have been put forth to resolve the current crisis. In the third and final section, I suggest that the proposed solutions are reactive in nature and are built upon the assumption that the underlying problem in the profession is a lack of appropriate incentives. The proposed solutions examined in Section 2 all share the belief that changing the reward structure will eliminate the deep problems in the field. This assumption over-emphasizes a mechanical way of framing the crisis in accounting and completely ignores more meaningful proposals. In the end, this paper concludes that the accounting profession should focus less on incentives and more on the underlying issue of identity. The question of what it means to be an accountant in the 21st century is the single most important issue facing today’s accounting profession. Is accounting properly understood as a sub-discipline of finance? Or, as I will suggest later in this paper, is accounting more appropriately conceived of as an area of applied ethics? By focusing attention on this issue and initiating a dialogue, the accounting profession can seize the moment, take appropriate action, and benefit from the important opportunity for growth and development offered by the current crisis in accounting. Chief Justice Warren Burger once wrote that the accountant performs a ‘‘‘public watchdog’ function [that] demands that the accountant maintain total independence from the client at all times and requires complete fidelity to the public trust.’’ While the profession today may seem far from this goal of ‘‘complete fidelity to the public trust,’’ it remains a goal worth pursuing and an ideal worth achieving.
1. CAUSES FOR THE CRISIS IN THE ACCOUNTING PROFESSION Robert L. Bunting (2005), the newly installed chairman of the American Institute of Certified Public Accountants (AICPA), recently remarked as
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follows: A great profession takes a long view. Its members inherit a legacy from the past, derive benefit from it, build on it and pass it on to the next generation even stronger than they found it. A great profession occupies a position of trust. When we review our assets, none is as important as our position of trust in the economic marketplace. A great profession builds bridges of communication and credibility with key stakeholders. These include the regulators and government bodies who rely on our skills and services to advance the public interest. A great profession plays a vital role in the health of our economy and our society. And a great profession renews itself. It does so by attracting a continual flow of talented new professionals. And it renews itself by carving new roads that can accommodate the needs of future travelers.
No doubt, Bunting is correct here. But, if so, what caused the accounting profession to lose its own road and to jettison (at least temporarily) its legacy from the past? Of course, there is no one underlying cause for the current crisis in the accounting profession. There are multiple and interrelated causes.
1.1. Good Old-Fashion Greed Many accounting professionals believe that at least one of the contributing causes of the accounting crisis is greed. Barry Melancon president and CEO of the AICPA put this ‘‘theory’’ tersely as follows: ‘‘What went wrong? For executives of Enron, WorldCom, and yes, for some auditors, part of the problem was simple arrogance or greed’’ (Melancon, 2002). So too, Arthur Wyatt, former managing director of Arthur Andersen & Co., and a former chair of the AICPA’s Accounting Standards Executive Committee, believes that greed is one of the major contributing factors for the recent increase in the number of audit failures. In his words: Just as greed appears to have been the driving force at many companies that have failed or had significant restructurings, greed became a force in the accounting firms. In essence, over the 40 years leading up to the end of the 20th century, the cultures of the firms had gradually changed from a central emphasis on delivering professional services in a professional manner to an emphasis on growing revenues and profitability. The historical focus was on quality service to clients in order to provide assurance to investors and creditors on the fairness of clients’ financial statements. The credibility that a clean audit opinion added to a client’s financial statements was the central reason for a CPA firm’s existence. This shifted to a focus on an ever-expanding range of services offered to a client pool fighting to meet short-term earnings expectations (in Wyatt & Gaa, 2004).
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While there is no question that greed was one of the driving forces among some auditors and accountants, it is highly unlikely that greed alone is the single cause for the current crisis. Greed puts the blame on individual managers, accountants, and auditors and ignores the broader structural issues that are also in play here and cannot be ignored. Further, it is hard to believe that suddenly, at the beginning of the current century, there was a simultaneous upsurge in greed among so many different agents. And, even if there was a sudden upsurge in greed, what caused this?
1.2. Shift in Values and the Creation of ‘‘Monstrous Moral Hybrids’’ Most commentators have downplayed the specific issue of greed in favor of a second cause for the current crisis. These accounting experts believe that one of the most important factors leading us to where we are today has been a general shift in values on the part of accounting professionals. Here is how James Gaa, one of the leading experts on accounting ethics, has summarized this position: Throughout the accounting profession the Commercial moral syndrome became predominant. At the same time, the audit function was unable to escape the demands of the Guardian morality. The result is the mixing of moral syndromes, resulting in what [Jane] Jacobs calls ‘‘monstrous moral hybrids,’’ which she defines as ‘‘organizations that, instead of sticking to their own syndrome, take whatever they choose from either.’’ In the case of auditing, words were consistent with Guardian morality, while actions bespoke Commercial moralityy. This theory of the morality of the workplace implies that the current problems of the public accounting profession are an inevitable consequence of mixing Guarding and Commercial moral syndromes, and in particular of allowing Commercial morality to dominate the workplace (in Wyatt & Gaa, 2004).
Gaa goes on to suggest that public accountants wanted to have it both ways. They tried to reap the financial benefits of the Commercial moral syndrome and to simultaneously claim the ethical high ground associated with the Guardian moral syndrome. And this, he asserts, is impossible. While I am uncomfortable with any explanation that claims that ‘‘the current problems of the public accounting profession are inevitable consequences’’ of any single cause, there is much truth to Gaa’s analysis. In a similar vein, Stephen Zeff (2003), one of the leading historians of accounting history, reaches a similar conclusion. In his words, as early as ‘‘1980, a deterioration in professional values appears to have set in.’’ He goes on to cite the following telling evidence of the shift in values at the top accounting firms that continued during the decade of the 1980s.
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Changes in the big firms signaled their further removal from the mainstream professional dialogue. By the mid-1980s, all of the Big Eight firms’ house organs that occasionally contained technical articles on accounting and auditing either closed down or became entirely nontechnical. Following the decision by Lybrand, Ross Bros. & Montgomery to do so in 1973, four Big Eight firms discontinued their house organs between 1981 and 1984 and the remaining two firms’ house organs soon became nondescript magazines with no affinity to the accounting profession. By the mid 1980s all of the firms’ newsletter had become entirely factual, evidently steering clear of the espousal of controversial views on matters of accounting principle (2002).
The top accounting firms were increasingly reluctant to take any stand on controversial accounting issues for fear that their clients would retaliate. Zeff points out that clear and unambiguous alarm bells were sounding as early as 1984. He quotes Donald J. Kirk, the then Financial Accounting Standards Board (FASB) Chairman who wrote more than 20 years ago, ‘‘my major concern is whether the profession will continue to operate in a way that protects its [auditing] franchise and ensures credible financial statements.’’
1.3. The Competition Heats up and The Audit becomes a Mere Commodity Accounting professors, Paul Healy and Krishna Palepu, among other commentators, identify the Federal Trade Commission’s (FTC) decision in the mid-1970s to pressure the then Big Eight accounting firms to compete with one another more aggressively for clients as one of the most significant reasons for the accounting crisis. The FTC became increasingly ‘‘concerned that the large audit firms were acting as a price-fixing oligopoly’’ (Healy & Palepu, 2003). While the FTC believed that the increased competition would lower prices and increase audit quality, history demonstrates that while it may have kept costs down, the FTC’s decision lead to a significant deterioration in audit quality. At the same time the FTC was pressuring the accounting firms to lower prices, there were a series of legal judgments that made it easier for investors and others to sue auditors and collect settlements. ‘‘Specifically, investors no longer had to show that they had relied on questionable accounting information in making investment decisions; instead, they could simply assert that they had relied on the stock price, which had itself been affected by the misleading disclosures’’ (Healy & Palepu, 2003). The judicial goal (based on the theory of efficient markets) was to hold auditors to higher levels of accountability.
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However, this decision, like the FTC decision, leads to perverse and wholly unanticipated outcomes. According to Healy and Palepu, to protect themselves from the ever-increasing number of lawsuits, accounting firms began to successfully lobby the FASB and the SEC for mechanical accounting rules. These lobbying efforts were highly successful. Between 1985 and 2002, FASB standards increased from about 2,300 pages to roughly 4,000 pages. In many cases, these new recipe-like rules made no attempt to communicate useful information to investors and creditors. A good example of this is the FASB’s history with deferred taxes. In addition, the firms themselves developed a set of ‘‘routine operating procedures to reduce variability in their audits.’’ Unfortunately, these new procedures lowered audit quality and increased the so-called expectations gap (i.e. the gap between investors’ expectations and auditors’ actual performance first noted during the late 1970s by the Cohen Commission). It is at this time that accounting firms and their clients began to think and treat the audit function – not as a professional activity at all – but as a mere commodity. With auditing’s low profit margins, accounting firms began to pursue aggressively the more lucrative consulting business. This leads us to the next cause, the inherent conflicts of interests between the auditing function – where accountants act as a kind of umpire, and consulting – where accountants have a strong financial interest in the very same company that they are auditing.
1.4. The Conflict of Interests and Auditor Independence Joshua Ronen and Cherny (2003) point out that combining consulting and auditing could potentially enhance the quality of audits because auditors/ consultants gain relevant knowledge about the inner-workings of a company that auditors alone might not obtain. Almost no one else agrees with this observation. Once the consulting profits became material, as in the case of Andersen and Enron, it became very difficult to challenge management about concerns rising from an audit. Arthur Wyatt elaborates as follows: Auditors became more willing to assume additional risk in order to maintain their revenue levels. Many long-standing audit procedures that put audit personnel in touch with recurring transactions were scaled back [contrary to Ronen and Cherny’s claim]. Clients were more easily able to persuade engagement partners that their way of viewing a transaction was not only acceptable but also desirable. Audit partners too often acquiesced to the client views in the current period agreeing to fix the problem next quarter
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or next year. The audit framework was undermined, and the result has been massive bankruptcies, corporate restructurings, and ongoing litigation (in Wyatt & Gaa, 2004).
SEC Chairman Arthur Levitt made impassioned pleas to the accounting profession concerning conflicts of interest. Among other issues, he pointed out that in 1993 only about one-third of accounting firms’ revenues derived from consulting, by 1999, consulting constituted more than half of the accountants’ revenues (Levitt, 2002).
1.5. Changes in the Nature of Assets and Liabilities Another reason for the current crisis in the accounting profession has been a dramatic change in the economic environment in which business operates. Intangible assets that are much more difficult to measure are often seen as more important than more traditional physical assets like property, plant, and equipment. According to one estimate, the value of intangible assets dramatically increased between 1982 and 1992 as a percentage of total market value, rising from 38% to 62% (Lev & Daum, 2004). In addition, new kinds of risks have emerged which make it harder to measure liabilities in an accurate and useful way. Similarly, it is becoming much more difficult to gauge precisely when revenues should be recognized or expenses accrued. This is a particularly difficult situation in the software industry, finance, and other high-tech industries. These kinds of changes have certainly not been caused by the accounting profession, nevertheless it is important to point out that the accounting profession has been extremely slow in responding to these changes in a useful way. The case of employee stock options and the profession’s inaction on providing useful measures is the most notorious and publicized issue in recent history, but it is by no means unique. Human resource accounting, goodwill, deferred taxes, and off-balance sheet financing all remain problem areas in financial accounting. Even lease accounting, an area the FASB has devoted significant time and resources to, continues to cause difficulties. Forbes recently reported that 145 companies have been hit with lease accounting problems and 36 companies have had to restate earnings because of improper lease accounting. Lynn Turn, a former chief accountant at the SEC, stated, ‘‘It has been surprising to see the number of companies, with the blessing of their auditors, who got this simple, basic accounting wrong’’ (Forbes, March 15, 2005).
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1.6. A New Way of Describing the Accounting Function Is the accounting profession in crisis? With the advantage of 20–20 hindsight, perhaps nothing should have concerned the profession, regulators, and the public more than the top accounting firms’ decisions to change the way they described their own businesses. ‘‘In the latter 1980s, the big firms began distancing themselves from the term ‘accounting,’ as they expanded the horizons of the information services that CPAs might render’’ (Zeff, 2003). Related to this dramatic change in how the top accountants described themselves, is an equally incredible and telling article written by one of the leading accounting professors in the world, and published in the California Management Journal. In 1992, Baruch Lev (1992) called for companies and their accountants to adopt what he called an ‘‘information disclosure strategy.’’ He argued that disclosure decisions should now be made in the same way that other business decisions are made – through the use of the cost–benefit criterion. In his words, ‘‘Disclosure activity does not differ in principle from other corporate activities, such as investment, production, and marketing. Disclosure shares with these activities the fundamental characteristics of providing benefits and incurring costsy’’ (p. 10, emphasis added). As Joshua Krausz and I wrote in our 1995 book, we believe that the cost benefit criterion provides, at best, an incomplete guide for managers weighing disclosure decisions (Pava & Krausz, 1995). At the time, we responded in a strong, negative way to Lev’s information disclosure strategy by noting that: intuition and the available evidence on fraudulent reporting suggest that managers should view information disclosure as part of a moral pull, rather than a self-interested push. First and foremost, managers need to view information strategy as a mechanism for meeting their obligation to provide complete neutral information, as opposed to yet another opportunity to maximize profits.
I am not suggesting that Baruch Lev’s article was one of the causes for the current crisis in accounting. Lev is, of course, among a handful of the most respected accounting professors. My point is that the logic of his article suggests – with no apology – that accounting is, in actuality, a subdiscipline of finance. This view marks a radical departure from more traditional notions of what accounting and accountability historically stood for. Lev’s view was and is the mainstream view among accounting academics and thinkers, and it has received a warm reception among accounting professionals. In fact, the academic jettisoning of the whole notion of
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accountability in favor of a cost–benefit criterion complements and reinforces the accounting profession’s own decision (made at roughly the same time) to abandon the very term – accounting. At the broadest level, corporate accountability can be defined as the systematic and public communication of information that is designed to justify an organization’s decisions and actions to various stakeholders. According to this definition, corporate accountability is primarily a form of ethical communication directed toward those parties who are affected by corporate activities and outcomes. It is an attempt by the corporation to explain itself in a reasonable and meaningful way to the society in which it operates. Neither the accounting profession’s invention of the phrase ‘‘information services,’’ nor Lev’s advocacy of an ‘‘information disclosure strategy’’ were purposeful attempts to move companies and their accountant and auditors away from corporate accountability as defined above. Nevertheless, these new ways of talking and teaching about the accounting function, and new ways of framing the role of the professional accountant, surely had the effect to further marginalize the kind of ‘‘ethical communication’’ that real accountability demands.
2. PROPOSED SOLUTIONS TO THE CRISIS IN THE ACCOUNTING PROFESSION In 2002, in response to massive accounting and auditing failures at Enron, WorldCom, and other well-known companies, the United States Congress passed the Sarbanes-Oxley Act. The purpose of this legislation as stated is ‘‘To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.’’ In this section, some of the provisions of Sarbanes-Oxley are noted and a number of other proposed solutions to the accounting crisis are examined. 2.1. Policing the Policemen: Creating the PCOAB Among the many features of Sarbanes-Oxley is the creation of the PCOAB, a new entity designed to replace the profession’s own oversight board. This new body is neither government-sponsored nor taxpayer-funded. It has powers to: 1. register public accounting firms that prepare audit reports on the financial statements of public companies;
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conduct inspections of auditing practices of these registered firms; enforce compliance by these registered firms; investigate, discipline, and impose sanctions on firms; and establish or adopt by rule auditing, quality control, ethics, independence, and other standards related to the preparation of audit reports on the financial statements of public companies. (as quoted in Carmichael, 2004).
As Douglas Carmichael (2004), the Chief Auditor at PCAOB, has noted, ‘‘the underlying mission of the PCAOB is to restore the confidence of investors, and society generally, in the independent auditors of public companies. There is no doubt that the repeated revelations of accounting scandals and audit failures that led to the creation of the PCAOB have seriously damaged public confidence.’’
2.2. Additional Provisions of Sarbanes-Oxley In addition to creating the PCAOB, Sarbanes-Oxley now prohibits accounting firms from providing with the audit, any non-audit service unrelated to the audit. It also mandates that a company’s audit committee is responsible for the appointment, compensation, and oversight of the auditing firm. Members of the audit committee must remain independent. Further, Sarbanes-Oxley explicitly states that each annual and quarterly report must disclose all material off-balance sheet transactions and obligations. Finally, the principal executive officers of a company must certify each annual or quarterly report attesting that he or she has reviewed the report and that it does not contain any untrue statement of a material fact or omit a material fact. There is no doubt that Sarbanes-Oxley represents a fundamental change in accounting oversight and regulations, although how effective it will be in the long run in ‘‘improving the accuracy and reliability of corporate disclosures’’ is still an open question. While some critics believe the legislation has proved to be too draconian, others feel the legislation has missed the mark in some key areas. The San Francisco Chronicle, for example, reported that there is significant ‘‘backlash over Sarbanes-Oxley’’ especially over Section 404, which ‘‘requires companies and third-party auditors to document, in rigorous detail, the procedures for assuring the accuracy of their financial statements. It further forces companies to disclose any weaknesses in those procedures
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called internal controls’’ (March 13, 2005). According to one survey, companies are spending, on average, almost $4.5 million in order to comply with Section 404. This figure is more than double the amount estimated last year. 2.3. Changing the Ground Rules I – Stock Exchanges should Hire and Pay Auditors Other critics, however, have called for an even more radical overhaul of the status quo than required by Sarbanes-Oxley. Healy and Palepu, for example, note that while Sarbanex-Oxley is a step in the right direction, it fails to ‘‘meet the more fundamental challenge of shifting the basis of competition in auditing from price to quality because they leave the current arrangement, whereby managers pay the auditors on behalf of the shareholders, essentially unchanged.’’ This particular criticism may be overstated given that the Act does require all audit committee members to be independent, and the existence of at least some empirical evidence that suggests that more independent boards are likely to engage auditors that act more independently of management and are less likely to allow earnings management to occur (Klein, 2003). Nevertheless, there is still room for legitimate concern here. Healy and Palepu suggest that the stock exchanges, rather than boards, should be responsible for hiring and paying for auditors. In addition, Healy and Palepu (2003) believe that auditors should issue an accounting rating similar to bond ratings. We envisage that they [stock exchanges] would go several steps further and assume responsibility for hiring and firing auditors, negotiating their fees, and overseeing the outcome of audits themselves. Because stock exchanges have incentives to ensure that all information, including bad news, is disclosed, they would empower auditors to be more critical of the firms they audit. In addition, by overseeing audits for all member companies, stock exchanges would be in the best position to assess quality differences across audit firms and press low quality firms to improve.
2.4. Changing the Ground Rules II – Insurance Companies should Hire and Pay Auditors Like Healy and Palepu, Ronen and Cherny (2003), when it comes to audits, are concerned about who is paying whom. (Unlike Healy and Palepu, though, they believe that Sarbanex-Oxley has been ‘‘largely ineffective.’’) Ronen and Cherny do not believe that it is the auditors who should be blamed for the problems in financial reporting. In defending the auditors,
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they write: The auditor, being the easiest target, is singled out as the culprit even though market participants and circumstances contributed as well. The culpability was based on the belief that, had the outside auditor done his job, the failures would have been prevented and the concomitant losses incurred by shareholders and creditors would not have occurred. Such a belief betrays a false expectations on the part of financial statement users, exacerbated by the failure of the promulgators of GAAS and GAAP.
So, if the problem is not with the auditors, is there really any problem at all according to Ronen and Cherny? To the extent that there is a problem (and on this issue Ronen and Cherny state that the number of audit failures is not high by historical standards), Ronen and Cherny believe that it results from the fact that clients pay for their own auditors. Despite the fact, then, that Ronen and Cherny are among a few of the accounting researchers who see no contemporary crisis in accounting, surprisingly they offer one the most far-reaching and drastic new proposals for changing the current structure of how audits are performed. Their proposal has two parts. Most importantly, they argue for what they term, Financial Statement Insurance (FSI). ‘‘Instead of the company appointing and paying the auditor, the company would purchase FSI, which would provide investors and creditors, to the extent of the coverage, financial compensation of misrepresentations in financial statements. The FSI insurance carrier would retain and pay the auditor.’’ Second, they suggest changes to generally accepted auditing standards (GAAS), limiting the number of elements upon which auditors opine to those that ‘‘can reasonably be verified.’’ According to Ronen and Cherny, this proposal contains numerous benefits. First, ‘‘because the FSI carrier is paying the auditor, the auditors efforts are focused toward protecting the FSI carrier.’’ Second, since loss recovery would be limited to the amount of the FSI coverage, investors would take a more active stance in corporate governance. Third, given that the premium paid to the insurance carrier would be disclosed publicly, this would provide an enhanced signal to investors and creditors concerning the perceived risk associated with the company’s financial statements. Finally, the authors note that auditors would have a strong incentive to avoid the cost of an audit failure, as this would jeopardize other audit assignments assigned by the insurance carrier. In summarizing their proposal, Ronen and Cherny write that ‘‘FSI facilitates the professionalization of the auditor along the lines of [Chief Justice] Burger’s definition [of what it means to be a professional] by arranging the auditors incentives so as to remove the conflicts that currently exists in the auditor’s relationship with the target of the audit, the ‘client’.’’
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2.5. The Common Assumption of the Proposed Solutions Sarbanes-Oxley, the creation of the PCAOB, and both the Healy Palepu and the Ronen/Cherny proposals are all based on the common assumption that the underlying problem in accounting and auditing has been the misalignment of accountants’ incentives. Simply put, all of these solutions and proposed solutions assume that the current crisis in accounting can be overcome by changing the rules of the game in a fairly mechanical way. While there is no agreement on precisely how to change the structure, there is an unquestioned consensus that the best way to approach the current situation is through what has become known as the principal-agent model. I suggest here that while this approach is a necessary one for contemplating reasonable solutions, it is not a sufficient one. The accounting crisis is a crisis that has been caused in part by the misalignment of incentives, but the crisis has deeper roots, as well. It is impossible to believe that the problems at Enron and WorldCom (to take just two of the most extreme examples) were caused only by an inappropriate reward structure. Certainly (with the aid of hindsight), it was not in the interest of the auditors to collude with management on highly questionable accounting procedures and to shred documents to avoid prosecution. So, if the problem is not only a principal-agent problem, what kind of problem is it? I believe the deeper problem revolves around the underlying issue of identity. To resolve the current crisis in the profession, one cannot avoid the larger issue of what it means to be an accountant in the 21st century. Is accounting properly understood as a sub-discipline of finance as Baruch Lev and most other academics would have it? Or, is accounting more appropriately conceived of as an area of applied ethics? It is true that the accounting profession must, in part, examine how best to structure the incentive schemes under which auditors operate, and therefore Sarbanes-Oxley, and the other proposals discussed above are highly appropriate, useful, and creative reactions to the current crisis in accounting. Nevertheless, there is a clear and present danger that focusing only on these kinds of mechanical solutions will reinforce the very problem we are trying to solve. This is because there is a danger of a self-fulfilling prophecy here. When we assume that accountants and auditors can only act in selfinterested ways (as everyone of the above proposals does), we run the risk of reproducing this behavior. If we are expected to behave as self-interested agents, then that is precisely how we will come to behave. But, of course, the irony here is that it is exactly this kind of self-interested behavior that leads to the crisis in the first place.
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3. FROM MECHANICAL TO MEANINGFUL SOLUTIONS Yuthas et al., (2004) provide a trenchant criticism of the accounting profession. Citing the accounting profession’s own Public Oversight Board report (2002), the authors summarize the traditional and habitual reactive attitude and actions of the accounting profession. Past changes in the structural properties influencing the norms and values associated with pubic accounting came largely as a result of external pressure in response to some crisis. The 1929 market crash revealed accounting and reporting irregularities and the 1933 and 1934 securities and Exchange Acts followed. More recently, in the 1970s, the AICPA responded to the bankruptcies of high profile companies by forming the Cohen Commission. This Commission recommended changes to the auditor’s responsibility for detecting and reporting fraud. The Commission did not address institutional changes to the accounting profession. However, after hearings in Congress, a Senate Subcommittee was formed to consider whether governmental regulation of the accounting profession was needed. The Metcalf Subcommittee investigated these issues and, in response, the AICPA worked with the SEC to create a voluntary self-regulatory framework and resulted in the creation of the Public Oversight Board. In 1998, Arthur Levitt, then Chairman of the SEC, proposed that major constituencies in the audit process be brought together to assess the ‘‘impact of recent trends on the public interest.’’ This never occurred.
If the accounting profession is to move beyond the current crisis, it must choose to become more proactive than it has been in the past. If the problem in the profession is framed as a question of identity rather than as a question of getting the incentives exactly right, then the profession itself has a central role to play in resolving the current crisis. The remainder of this paper examines seven specific ideas on how to accomplish this.
3.1. View Accounting as an Ethical Activity Norman Bowie, a well-respected business ethics professor, wrote in the first article of the first issue of the Business Ethics Quarterly that business must move beyond the ‘‘egoistic paradigm’’ (Bowie, 1991). If this is true for business in general, how much more so for the professions, like accounting? Clarence Walton, another highly respected expert on business ethics, stated that among the main characteristics of any profession is an altruistic spirit, an ideology of service and not profit, and the promotion of the public interest. ‘‘Every profession has a monopolistic character. Society strikes a bargain with a specific group by saying that, if the profession performs a
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function society deems essential, it will grant a monopoly so that very few others may practice’’ (Walton, 1992). If so, then what is the precise function that accountants are performing for society? Corporate accountability, in its broadest sense, can be thought of as the systematic and public communication of information that is designed to justify an organization’s decisions and actions to various stakeholders. According to this definition then accountants should begin to view themselves as society’s experts in promoting this particular kind of ‘‘ethical communication.’’ This definition of the what being an accountant means is well grounded in the profession’s own traditional self-definition, even if it has never been put in these exact words. Further, it is meant to underscore the important opportunities for today’s accounting professionals. Certainly, there has been a profound and dramatic increase in the past two decades in the demand for more accountability across many different domains including government, politics, and business. It would be truly a sad irony if accountants, society’s professional watchdogs according to the Supreme Court, did not begin to supply this emerging demand in an efficient and useful way. Today’s accounting crisis represents a huge risk to the profession, but it also represents an enormous opportunity for learning, growth, and professional expansion. The reputation, status, and compensation of a profession can rise and fall over time. For example, pharmacy was once a thriving and dynamic profession. Unfortunately for the profession, over the past decades it has experienced a steep decline in its perceived status as its role in society has been diminished due to technological and other changes. Accounting may go the way of pharmacy, but this does not have to be the case. If the profession adopts a clear and unequivocal mission as society’s ‘‘accountability experts,’’ there is a huge potential for growth. 3.2. Lead Change Rather than React to Change – Start with Intangible Assets During the early part of the 20th century, corporations met their responsibilities to society by publishing audited annual reports that included income statements and balances sheets. These reports were backward looking (based on historical cost and not fair value), quantitative in nature, and notorious for a lack of transparency. During the latter part of the century, however, society’s view of accountability began to broaden along a number of dimensions, and annual reports began to reflect this increasing demand for enhanced corporate communication, however haltingly.
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Today, there is increasing emphasis on the balance sheet in favor of fair value accounting. Further, the SEC now requires the management, discussion, and analysis section (MD&A), which provides qualitative as well as quantitative information. In addition, the MD&A also contains useful forward-looking information (Pava & Epstein, 1993). Finally, the notion of transparency or full-disclosure has been embraced as an accounting goal. During the later part of the century, annual reports began to include additional information on segment reporting, pensions and other post-retirement benefits, capitalized leases, stock options, and other corporate transactions. This broadening of the concept of corporate accountability has not always been the first choice of accountants and auditors. Accountants and auditors have historically emphasized the notion of compliance, possibly out of a fear of litigation, and have often been extremely conservative in promoting the development of improved accounting standards and additional disclosure requirements. The current crisis in accounting, however, offers the profession a unique opportunity to re-evaluate this historic attitude. Accountants now have an opportunity to lead change rather than react to change. The attempt to develop enhanced reporting of intangible assets is an important and timely example of such leadership. Lev and Daum (2004) provide some explicit direction here. ‘‘In addition to financial statements, companies could publish supplemental information on business strategy and business models, along with operational and intangible key performance indicators via so-called supplemental corporate reports. Working groups of the US Securities and Exchange Commission and the Financial Accounting Standards Board have suggested this approach.’’
3.3. Recognize that there is No Such Thing as the Bottom-Line Accountants continue to view the single most important objective of accounting as enhancing investors’ and creditors’ abilities to predict the amount, timing, and uncertainty of future cash flows. (For a recent discussion supporting this view see American Accounting Association Financial Accounting Standards Committee, 2002.) This objective was first formalized as part of the FASB’s Concepts Project during the 1970s. It is time to broaden this objective in two distinct ways. First, annual reports should disclose other measures of outcomes beyond net income including environmental and social performance indicators. Second, the annual reports, if they are to truly be ‘‘accountability reports’’ should meet the
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needs of additional stakeholders including employees, local communities, environmentalists, policy-makers, and citizens. Allan White (1999) is unquestionably correct when he recently wrote: At the dawn of the 21st century, a new deal is taking shape between business and its external stakeholders. Though still in its formative stage, its contours are identifiable. It amounts to a redefinition of the corporate license to operate: Society may accept market capitalism as the dominant form of economic organization in exchange for deepening and broadening the standards of accountability to encompass the environmental, social, and economic dimensions of corporate activity. In a fundamental sense, the new license is firmly rooted in market mechanisms. It assumes that markets operate most efficiently when not only technology, capital, and labor, but also information flow freely across the globe. Corporate performance disclosure remains limited by the absence of international accounting standards even in the narrow and traditional domain of financial reporting. Thus, for the new deal to materialize, i.e., for the new license to operate to take effect, the standards of corporate accountability must be expanded to unprecedented levels.
Who will determine and supply these new ‘‘standards of corporate accountability?’’ This remains an open question. It is by no means clear that Certified Public Accountants (CPAs) will be the ones to do so, but there is little question that CPAs are a leading contender. The ‘‘new deal’’ about which White writes provides a huge opportunity for growth in the accounting profession, but it is up to the profession itself to seize the moment. While just a few years ago the phrase multiple bottom-line was more metaphor than reality, today it is more reality than metaphor. The Global Reporting Initiative (GRI) was established in 1997 as a joint venture between the Coalition for Environmentally Responsible Economies (CERES) and the United Nations Environment Program. In June 2000, GRI published a set of Guidelines to help companies improve on their environmental and social reporting. These guidelines were revised in 2002. According to Waddock (2004), 1,000 global companies now use some form of triple bottom line accounting in line with GRI Guideline – reporting on economic, environmental, and social behaviors and outcomes. These companies include: 3 M, AT&T, General Motors, Ford, Shell, McDonalds, Dupont, Dow Chemical, Nike, Canon, Electrolux, Ericsson, France Telecom, and smaller companies, as well. The accounting firm KPMG recently conducted a major survey of Corporate Sustainability Reporting and they concluded as follows: The results of the survey demonstrates that sustainability reporting and verification of these reportsyis becoming mainstream business. Reporting practices are no longer restricted to sectors with high environmental impact in Western countries, but also in non-industrial sectors and other regions. They survey results show that there has been a significant increase in the number of companies issuing environmental, social or
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sustainability reports. In 2002, almost half of the GFT250 [Global Fortune 250] and just under a third of the Top 100 companies produced these reports compared to 35% and 24% in 1999 respectively.
Accountants are already involved in these reports. In fact, the same KPMG study cited above, also documented that major accounting firms signed the highest number of verification statements accompanying social responsibility reports. Interestingly, The CPA Journal recently published an article calling for immediate action on the part of Securities and Exchange Commission to require some form of social responsibility reporting (Tschopp, 2003). If the SEC did so, they would be following precedents from France and the UK. (For a full discussion on this topic see Hess, 1999.) 3.4. Recruit, Hire, and Reward the Best and the Brightest In 2002, only 3% of accounting majors at the University of Pennsylvania’s prestigious Wharton school joined the accounting profession (Healy & Palepu, 2003). If the profession is to renew itself and to adopt as its mission, the goal of becoming society’s accountability experts, the profession will have to re-assess its hiring and promotion practices and criteria. In the future, accountants will have to possess both quantitative skills and highlevel verbal skills. In addition, the profession will require imagination and creativity in service of the profession’s ideals. And, of course, new recruits and those promoted must demonstrate uncompromising integrity and character. This is asking a lot. Nevertheless, neither any amount of leadership nor any tinkering with incentives will solve the accounting crisis unless accounting firms can attract the highest quality students. 3.5. Promote Dialogue How is it that emperor penguins survive in the brutal environment of Antarctica? With temperatures that can fall to –501C and with winds whipping at more than a 100 mi/h, scientists have been baffled by this question for years. It turns out, according to recent evidence, that the secret of the emperor penguins is that they form circles and share each others’ body heat. Periodically, the circle rotates and in this way no one bird is exposed to the freezing cold for too long. According to William Issacs (1999), these circles provide an ‘‘apt metaphor for the power of dialogue.’’ Issacs continues: How are we to deal with the cold and challenging winds of change? I will suggest we might do the same, by engaging in dialogue in our organizations and communities, to
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generate the resilience we need. The new economy we face in the twenty-first century consists of a very different set of forces from any known before. Shifting bases of power and an enormous emphasis on knowledge make the way human beings talk and think together of paramount importance. Human beings create, and share knowledge through conversation. It behooves us to heighten our abilities on this score.
Returning to accounting, in order to legitimately justify an organization’s decisions and actions, corporate accountability must now be viewed and described as a dialogue between the corporation and its stakeholders and not as a monologue on the part of management (see especially AccountAbility 1000s AA1000 – Principles and Measurement Standards). This means that corporate accountability requires listening to a company’s diverse stakeholders as well as responding to them. It also means that many companies must now openly recognize that corporate accountability is an evolving and contested concept. This can be seen clearly in a report recently issued by the tobacco company Brown and Williamson: Is there a desire to hear from all parts of society? Has dialogue been designed in a way that, either expressly or by implication, makes it difficult for certain people to take part? We want our dialogue process to be open to anyone. It has been, and will continue to be, designed to create an environment that makes it as easy as possible for people to engage in an open and unrestricted way. We have identified a number of groups who collectively represent a broad cross section of societyy. While significant progress was made during the second cycle of social reporting in regard to stakeholder engagement and dialogue, we realize it is not complete. We will continue to expand our engagement activities to include a full range of individuals and organizations in the process (emphasis added).
Interestingly, Brown and Williamson explicitly admit later in their report that their ‘‘emphasis on dialogue is well-suited to our objective of restoring trust with society.’’ Whether or not the company’s strategy will work is still an open question, but what cannot be denied is the growing awareness of dialogue as a formal component of corporate accountability. In fact, dialogue is emerging as one of its central and most innovative aspects. Dialogue does not imply that organizations, their managers, and boards are abdicating their responsibility for decision-making. But it does imply a recognition that organizations are embedded in society and rely on it for legitimacy. There are several specific implications for the accounting profession that flow from the increasing recognition of dialogue as a central component to accountability. First, the profession itself needs to conduct an internal dialogue. Many of the articles cited in this paper are already part of this process. This internal dialogue must be conducted like all dialogues. This means that participants must learn to listen to one another in a more proactive way. Participants
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must also learn to respect one another. ‘‘At its core, the act of respect invites us to see others as legitimate’’ (Issacs, 1999). Further, it implies an ability to suspend one’s own opinion in an attempt to learn from others. This is extremely difficult since in most cases not only do we have opinions, but the opinions have us. Finally, dialogue demands an ability to voice one’s own views and opinions in a fair, balanced, and unbiased way. Once again, a tall order. In the end, only the accounting profession will be able to answer the question of what it means to be an accountant in the 21st century. The better the quality of the dialogue – that is the more accountants listen, respect, suspend, and voice – the better the answer to this question will be. At the same time it conducts an internal dialogue, the profession must also learn to communicate better with outside constituencies. This implies that the profession must give up its belief that the so-called expectations gap can finally be bridged through public relations only. This strategy has always held that if only the accounting profession could better explain what it is that it is doing, all would be well. This strategy is not the strategy of dialogue but of monologue. To resolve the expectations gap, the accounting profession must listen, respect, and suspend before it voices. While the accounting profession must certainly enhance and strengthen the dialogues in which it itself is one of the participants, most important of all, the profession must come to see that its own role as the accountability expert demands that the process of accountability is viewed as part of a larger dialogue between the business organization and its corporate stakeholders. In this process, accountants and auditors should view themselves not as participants in the dialogue, but as the main facilitators of the dialogue. It is the role of the accounting professionals to ensure that the dialogue between business and its stakeholders is conducted in a transparent, honest, unbiased, open, and fair way. Accountants can no longer be party or witness to earnings management, nor can they continue to lobby for accounting regulations that benefit their clients to the detriment of the broader society. As suggested above, accounting reports should be broadened to include the interests of all stakeholders, not just investors and creditors. These reports must include better qualitative information, more forward-looking information, and information about environmental performance and social performance, in addition to traditional financial metrics. But, if accountability is to truly be considered part of a broader dialogue, accounting activities will also come to include: (1) the production of reports that encourage understanding, invite more questions from stakeholders, and facilitate learning; (2) the gathering of information from outside stakeholders; and (3) the provision of spaces (whether physical or
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digital) where stakeholders can come together and reason together about the organization, its performance, and its responsibilities to society. This conclusion is consistent with that of Yuthas et al., (2004). They write: Nothing less than a major paradigm shift is needed if the profession hopes to effectively address its current ethical dilemma. The profession must look beyond its reliance on the training, perceptiveness, and strength of individuals acting on their own, and begin to view ethics as a broader issue that is profoundly influenced not only by an individual acting in isolation but also by institutional conditions and the ongoing processes through which ethical assessments play out in a dynamic economic environment.
3.6. But Don’t Be Naive There is no doubt that there is also a darker side to dialogue. It is certainly fair to ask, for example, whether or not some organizations might use corporate social reporting as a tool to manipulate their stakeholders rather than inform them and dialogue with them? Above we cited the tobacco company Brown and Williamson’s commitment to dialogue as expressed in their social responsibility report. This commitment is clearly an attempt to achieve greater corporate accountability. In this report, the company now admits, with no qualifications, that their product ‘‘can and does cause disease’’ (p. 16). Further, the company is now publicly committed to developing a product that will reduce smokers’ exposure to harmful toxins and will refrain from marketing cigarettes to children. Nevertheless, the report raises as many questions about corporate dialogue as it answers. The company’s overriding claim that ‘‘balancing responsibility to ensure the long-term sustainability of our company with our responsibilities as a good corporate citizen is not a dilemma’’ is, at best, hard to understand (see p. 51). Does the company recognize that cigarettes are addictive in nature? If so, the company does not say this in this report. Although the document does state explicitly that members of the ‘‘public health group’’ hold the position that nicotine is an addictive substance, the company itself has not taken a position on this issue here (see p. 33). In fact, the company states that smokers ‘‘choose to use tobacco products’’ (the company’s emphasis) and ‘‘should be free to do so.’’ Second, the company still does not explicitly recognize the dangers of second hand smoke or what they call ‘‘environmental tobacco smoke (ETS).’’ For example, on p. 46, the document states that ‘‘government agencies have evaluated the evidenceyand concluded that ETS is a cause of serious disease.’’ But, has the company made this determination itself? And,
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does the company accept the government findings? The report takes no position on these important questions. If the company does believe that ETS causes serious disease, they should say so explicitly just as they now finally admit that smoking itself ‘‘can and does cause disease.’’ The fact that company uses different language with regard to ETS and cigarette smoking suggests that they are trying to make a distinction here, when in fact no distinction exists. Third, there is no explanation in this document on why marketing is an acceptable business practice when the product one is marketing ‘‘can and does cause disease.’’ The company claims that marketing is simply targeted to current smokers. If so, how does the company expect to survive in the long run? More explanation is needed. Fourth, a report advertising itself as ‘‘a social and environmental report’’ should include some specific statistics on the admitted dangers of cigarettes. For example, how many people die each year from smoking Brown and Williamson’s cigarettes? We are told over and over again in the document that there are 45 million smokers, but there are no specific statistics about the dangers these smokers are facing. Fifth, the report discussed its domestic policies but there is no mention of its policies in foreign countries. Obviously, the company is trying to represent its own interests in the best possible light. There is nothing wrong with this. There is a problem, however, when one uses ethical and moral language to hide unethical and immoral behavior. What does all of this imply about the question of corporate dialogue? I believe that dialogue is an essential component to the broadening of corporate accountability, but I also believe that a certain amount of skepticism is still in order. Despite all its shortcomings, even the Brown and Williamson report is a useful experiment. To the extent that the company addresses some of the questions I and others have raised, in the end, their report may in fact, lead to a real and substantial dialogue and enhance accountability.
3.7. Renew the Meaning of Generally Accepted Accounting Principles (GAAP) Section 108 of Sarbanes-Oxley Act requires the SEC to conduct a study on a principles-based accounting system. Among other issues, the study is to determine the feasibility of a principles-based system of accounting standards as opposed to the current rules-based system, and to provide an
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economic analysis weighing the potential effects of a move toward a principles-based system (Schipper, 2003). Framing principles and rules in stark either/or terms is a mistake. So too is the implicit assumption of Sarbanes-Oxley that the issue of whether or not to embrace principles is an economic question to be examined with familiar cost–benefit tools. Principles can be defined as an attempt to translate our highest ideals into action. By contrast, rules are regulations governing conduct within a welldefined and clearly specified context. If so, it is clear that the accounting profession, like any profession for that matter, needs both principles and rules to survive. While it is true that the accounting profession certainly does not suffer for a lack of rules, there is much less clarity surrounding its principles. It is time for a clear articulation of the profession’s most basic principles. Such an articulation would include the overarching mission of the profession as accountability experts and a handful of carefully selected professional responsibilities, clearly stated and defined. This list should include a commitment to integrity, dialogue, the creation and attestation of relevant and reliable information for all stakeholders, and a formal acknowledgment of the responsibility of serving as society’s watchdog. This new GAAP could fit on a postcard and should be used as a kind of hippocratic oath for accountants. It should be written in such a way that it is both clear and compelling. Readers should not only understand the principles, but should feel their importance, as well. In the final analysis, the accounting crisis was not caused by too many or too few rules or even by the wrong incentives. In a few cases, the crisis was flamed simply by accountants rejecting the rules in favor of outright fraud. In the vast majority of cases, however, the crisis was and is caused by the unprincipled manipulation of rules for personal or organizational profit. There is no profession that can survive for long in such a way. Every rulesbased system must necessarily be contained in a wider principles-based system. In short, rules must be interpreted and applied according to wellaccepted principles.
4. CONCLUSION This paper has examined the current state of affairs in the accounting profession and has asked the question of how best to resolve the current crisis. Most of the solutions being discussed in today’s accounting literature are
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mechanical in nature and assume that the underlying problem in the profession is a lack of appropriate incentives. There is no doubt that this is part of the problem and such solutions will be helpful. Nevertheless, the thesis offered here is that the profession must also view the current crisis as an opportunity to define its own identity. The crucial question facing the profession is: What does it mean to be an accountant in the 21st century? No profession can long exist without a clear and simple mission to serve the public interest. In the case of accounting, the mission is to promote corporate accountability. This paper has defined corporate accountability as the systematic and public communication of information that is designed to justify an organization’s decisions and actions to various stakeholders. According to this definition, accountants might begin to view themselves as society’s experts in promoting and sustaining this particular kind of ‘‘ethical communication.’’ Accountants can serve the indispensable role as facilitators of the dialogue between business and its stakeholders. In the end, accountants should think of their activity as a branch of applied ethics rather than as a branch of applied finance. Several prescriptions derive from this reframing are as follows: 1. 2. 3. 4. 5. 6. 7.
view accounting as an ethical activity; lead change rather than react to change – start with intangible assets; recognize there is no such thing as the bottom line; recruit, hire, and reward the best and the brightest; promote dialogue; but don’t be naive; and renew the meaning of GAAP.
With regard to this last point, the requirement of Sarbanes-Oxley to weigh the costs and benefits of moving to a principles-based accounting system is deeply symptomatic of the underlying crisis in accounting. In the end, the profession must come to see that principles are a matter of ethics and not economics.
REFERENCES American Accounting Association Financial Accounting Standards Committee. (2002). Recommendations on disclosure of nonfinancial performance measures. Accounting Horizons, 16(4), 352–362. Bowie, N. E. (1991). Challenging the egoistic paradigm. Business Ethics Quarterly, 1(1), 1–21. Bunting, R. L. (2005). Renewing a great profession. Journal of Accountancy, 199(1), 58–61. Carmichael, D. R. (2004). The PCAOB and the social responsibility of the independent auditor. Accounting Horizons, 18(2), 12–133.
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Healy, P. M., & Palepu, K. G. (July 2003). How the quest for efficiency corroded the market. Harvard Business Review, 81(7), 76–85. Healy, P. M., & Whalen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 14(4), 365–384. Hess, D. (1999). Social reporting: A reflexive law approach to corporate social responsiveness. Journal of Corporation Law, 25, 41–84. Issacs, W. (1999). Dialogue: And the art of thinking together. New York: Doubleday. Klein, A. (2003). Likely effect of stock exchange governance proposals and Sarbanes-Oxley on corporate boards and financial reporting. Accounting Horizons, 17(4), 343–355. Lev, B. (1992). An information disclosure strategy. California Management Review, 34, 9–30. Lev, B., & Daum, J. H. (2004). The dominance of intangible assets: Consequences for enterprise management and corporate reporting. Measuring Business Excellence, 8(1), 6–17. Levitt, A. (2002). Take on the street, (with P. Dwyer), (New York: Pantheon Books). Melancon, B. (2002). A new accounting culture. Journal of Accountancy, 194(4), 27–31. Pava, M. L., & Krausz, J. (1995). Corporate responsibility and financial performance: The paradox of social cost. Westport: Quorum Books. Pava, M. L., & Epstein, M. (1993). How good is MD&A as an investment tool? Journal of Accountancy, 175(March), 51–54. Ronen, J., & Cherny, J. (2003). A prognosis for restructuring the market for audit services. The CPA Journal, 73(5), 6–9. Schipper, K. (2003). Commentary: Principles-based accounting standards. Accounting Horizons, 17(1), 61–72. Tschopp, D. (2003). It’s time for triple bottom line reporting. The CPA Journal, 73, 11. Waddock, S. (2004). Creating corporate accountability: Foundational principles to make corporate citizenship real. Journal of Business Ethics, 50, 313. Walton, C. (1992). Corporate encounters: Ethics, law & the business environment. Orlando, FL: Dryden Press. White, A. L. (1999). Sustainability and the accountable corporation. Environment, 8, 30–44. Wyatt, A., & Gaa, J. (2004). Accounting professionalism: A fundamental problem and the quest for fundamental solutions. The CPA Journal, 74(3), 22–31. Yuthas, K., Dillard, J., & Rogers, R. K. (2004). Beyond agency and structure: Triple-loop learning. Journal of Business Ethics, 51(2), 229. Zeff, S. A. (2003). How the US accounting profession got where it is today: Part II. Accounting Horizons, 17(4), 267.
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PRESSURES ON THE MANAGER IN THE ORGANIZATION: OBSTACLES AND AIDS TO ETHICAL BEHAVIOR Gerald F. Cavanagh S. J. The manager in the contemporary U.S. business firm is under greater pressure to achieve short-term financial results than was true a decade ago. Global competition demands greater efficiencies and lower costs. Moreover, the ‘‘success’’ of a manager in publicly held firms is measured by fund portfolio managers, who hold most of the firm’s stock. They watch the daily movements of that stock, ready to purchase more if the stock rises, or to sell if the stock declines. This relentless demand to reduce costs places strains on all managers, from CEOs to first-line supervisors, who are trying to adhere to her/his professional principles of ethical conduct. The challenged principles of conduct range from the basic ethical principles of treating people honestly and with dignity, to more formalized standards, such as an auditor’s code of ethics. Let us examine a case that has gained much attention. WorldCom (later MCI, and perhaps soon to be part of Verizon) had two accountants who had differing reactions when they were asked to look the other way in face of what were questionable accounting entries.
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CONFLICT FOR PROFESSIONAL ACCOUNTANTS AT WORLDCOM WorldCom has been in the headlines since 2002 because of the $11 billion fraud that it acknowledged at that time. In order to please Wall Street and investors, WorldCom’s top executives inflated the firm’s profits by misallocating expenses and making many false accounting entries. The reactions of managers within WorldCom varied dramatically. Vice President of Internal Audit Cynthia Cooper and internal auditors Gene Morse and Glyn Smith became suspicious of accounting entries, which had no supporting documentation. They decided to pursue their suspicions. Working on their own time for several months and often late at night, the team ultimately uncovered $3.8 billion in false entries. During the course of their investigation, the internal auditors presented their suspicious information to both the chief financial officer Scott Sullivan and to WorldCom external auditors at Arthur Andersen.1 Both Sullivan and the auditors at Arthur Andersen defended the entries and refused to provide additional information or to pursue the matter any further. The internal auditors at WorldCom found the fraudulent accounting entries four-quarters after they first began. Betty Vinson was a senior accountant in WorldCom’s corporate accounting division. She was a competent, conscientious, loyal employee who followed her manager’s instructions. WorldCom began to incur losses as long-distance competition increased. By late 2000, Vinson and other accountants were asked to make false entries so that WorldCom would continue to appear to be profitable. Vinson knew that this was dishonest, and she objected. But ultimately she made the entries after she was assured by her manager that this was a one-time fix and would not happen again. But Vinson and other accountants were asked to make false entries in the following three-quarters also. She and two others seriously considered quitting on two occasions. But Vinson was persuaded by her supervisor not to quit. On June 17, 2002 internal auditors Cooper and Smith walked into Vinson’s office and asked for documentation for the suspicious entries, and Vinson told them that she did not have supporting documents. Within a few days and in a panic Betty Vinson and two other accountants told representatives of the Securities and Exchange Commission (SEC), FBI and a U.S. attorney about their false entries. Vinson and the other accountants argued that they were merely good employees following orders. When prosecution of the case was moved to New York, Vinson was charged with conspiracy and securities fraud. Unable to afford the costs of a trial, and hoping for leniency, she pled guilty. She will probably spend time in jail.
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And as part of her plea bargain, Vinson testified against former WorldCom CEO Bernard Ebbers at his trial in New York City in 2005 when Ebbers was convicted.2 Note the difference in the way the two accountants, Vinson and Cooper, met their professional responsibilities. Cooper pursued her suspicions, even when her immediate supervisor – the chief financial officer of WorldCom – asked her to back off. She continued to inquire on her own time, at night, and at the risk of her own job. On the other hand, Vinson followed orders and was a good soldier. Vinson became increasingly aware that what she was being asked to do was both unethical and illegal, and she considered resigning. But ultimately she did not resign and she made the fraudulent accounting entries. Cynthia Cooper showed unusual courage, and was featured in the cover story as one of the three of Time magazine’s ‘‘Women of the Year’’ in 2002 for her integrity in pursuing the fraudulent practices. However, Betty Vinson is probably a more typical business manager, who wants to believe that the organization which provides the means of support for her and her family is honest and has integrity, and so does what her manager requests. Let us now examine the obstacles and the support managers such as Cooper and Vinson meet in adhering to their professional responsibilities.
OBSTACLES FOR THE PROFESSIONAL As the case of the WorldCom accountants Vinson and Cooper illustrates, there are numerous obstacles and supports for the manager who attempts to maintain and to build personal integrity in the organization. Both the obstacles and pressures stem from three sources: (1) the market and legal system; (2) the climate of the particular organization; and (3) the personal values of the individual manager. First, let us examine the pressure from the free market.
Pressure from the Free Market Adam Smith identified and applauded self-interest as a source of dynamism in free markets. Self-interested behavior encourages competition, flexibility, and innovation, and also results in efficiencies and lower costs. This behavior thus ultimately promotes the financial success of the firm.
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Self-interest has increased in practical importance for many American professional people. It has been expanded to become a moral principle in most aspects of their personal lives. For many it has become a guiding value and is thus a determining influence on personal goals and behavior. George Soros points out that self-interest as a personal moral value so dominates American goals and attitudes that it has become dysfunctional; he calls this attitude market fundamentalism. Soros, benefited from the market and made billions on hedge funds. Market fundamentalism is described as an attitude that holds that all human activities are potential economic transactions with a single measuring rod – money. Thus not only contracts, but also social relationships and interactions are measured by the dollar value, to me, of that relationship. In this view, the invisible hand of profit maximizing competition guides all interactions of people, not just pure economic transactions. Not surprisingly a corollary of this position is that government should have as little a role in human activities as possible. Market fundamentalists are convinced that markets are self-correcting and that any attempt to insure the common good or the collective interest of the community distorts the market, reduces efficiency, and is ultimately ruinous.3 Such an attitude is not new. Conservative economists, libertarians, and Ayn Rand have long advocated this position. What is new is that such attitudes have become more widespread, even though the personal goals, ideology, and tradeoffs that support them are often not well understood.4 According to U.S. law, the goal of the corporation is to maximize profit for shareholders. Hence a narrow view of the role of the firm, seeing the goal as exclusively generating returns for shareholders, is encouraged by the legal position of the corporation itself. The corporation is given vast power and limited liability under U.S. law.5 Thus market fundamentalism, coupled with the limited liability of the corporation, provide a powerful rationalization and tool, to pursue shareholder and personal wealth regardless of the costs to others – even when many other people are harmed. Such attitudes encourage the lack of professional behavior we see in managers of the firms we read about on the front pages.
Organizational Culture WorldCom, Adelphia, ImClone, Enron, Hollinger, Parmalat, Arthur Andersen, Ahold, and almost all the Wall Street financial services firms, from Morgan Stanley to Goldman Sachs, are firms in which the organizational culture allowed and even encouraged personal and corporate
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avarice to dominate. These managers then engaged in deception to cover up the failures that their greed produced.6 Each of the major professional accounting firms still are involved in a conflict of interest in which their auditors are encouraged to provide a clean audit to the firm so that the accounting firm can retain that firm’s consulting business. Moreover, for each of the major accounting firms and especially for KPMG, a large part of that consulting business was selling unethical and illegal tax avoidance to corporations.7 The accounting oversight and lobbying group, the American Institute of Certified Public Accountants (AICPA), opposed most of the measures that became law in the Sarbanes-Oxley bill. The AICPA has thus lost much of its moral stature. The fact that the AICPA is charged with oversight of individual accounting firms and the profession as a whole, and also lobbies government in the interest of these same accounting firms is a conflict of interest. A conflict of interest is a classic problem for any professional, and surely for a manager who has responsibilities to multiple parties. A purchasing agent who accepts a gift from a supplier is engaged in a conflict of interest. The gift goes to the agent and this with the intention of influencing her judgment. Hence she is more likely to purchase supplies that are of a higher price or lower quality than other goods available. When executives like John Rigas of Adelphia and Dennis Koslowski of Tyco purchased personal property with funds that belonged to their firm, this was a conflict of interest. As executives of publicly owned companies, they act as agents of shareholders and other stakeholders, so when they take actions that benefit primarily themselves, this is a conflict of interest, and we call these executives conflicted. Conflict of interest is also an important issue for a public official, since that official’s basic responsibility is to work for the public interest or the common good (for terms, see Table 1), and not to give preference to a person or organization that provides the public official with personal benefits.8 The demands of global competition are sometimes cited by the professional manager as a rationale for engaging in conflicts of interest or other ethical shortcuts; profits must be obtained even if it means cutting corners and ‘‘temporarily’’ setting aside one’s professional obligations. Financial and accounting workers have specific, written professional standards. Moreover, all managers are expected to treat subordinates with the dignity they deserve – even if these obligations have not been spelled out in a professional or firm code. For example, layoffs are sometimes necessary in order to reduce costs. However, when lying off a person, an executive has a
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Table 1. CEO CFO COO Character Common good Conflict of interest
Free market Goal Ideal Market fundamentalism Moral Morality Moral development Value Virtue
Business, Values and Ethics Terms.
The Chief Executive Officer of a firm The Chief Financial Officer of a firm The Chief Operating Officer of a firm A stable, organized personality with a composite of good and bad moral habits The well-being of all the members of the community; the good of the entire society taken as a whole A situation in which a person may gain personal benefit from actions she or he may take based on obligations the person is entrusted to manage An unregulated economic market operating by free competition of buyers and sellers The result toward which effort is directed; the end to be pursued An ultimate goal that an individual or a society holds for itself; a standard of perfection All economic, social, and human interactions are contract-based and are measured by money Dealing with or capable of distinguishing right from wrong The rightness or wrongness of principles, practices, and activities, along with the values and rules that govern them Increased ability of a person to distinguish right from wrong and to engage in good behavior A lasting belief that a certain goal or mode of conduct is better than the opposite goal or conduct A good moral habit that has been acquired by choosing the good
responsibility to that person, which includes helping the person obtain new employment. The increasing possibility of being a subject to layoff undermines the sense of security of professionals, and often causes stress. It is more difficult to examine long-range issues and to maintain one’s professional obligations when a manager is not certain of her future with the organization. In addition, a large number of U.S. workers feel stress from a variety of other sources at work; 62% say their workload has increased and 53% say that their work leaves them overtired and overwhelmed. In addition, more than a third of all U.S. workers say that their work is harming their personal relationships and their physical and emotional health. This stress lowers productivity in the workplace, and is estimated to cost the U.S. more than $300 billion each year in health care and missed work.9 More to our point, this stress and lack of security increases the pressure on the professional in the organization to work quickly and ‘‘make the numbers’’; as a result the
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manager is more likely to neglect the responsibilities that come from outside the firm and from one’s profession, the code of one’s own firm and one’s conscience. In addition to the obstacles that the market and the firm may throw up in observing professional ethical standards, there are also personal characteristics that make a person more likely to abandon professional integrity.
Personal Obstacles Many of the executives who participated in the scandals listed above demonstrated a lack of moral maturity. While they are intelligent, articulate, well educated, and privileged, their behavior indicates a truncated moral development. Note that almost all were men, except for Martha Stewart. Observe the self-serving behavior that was evident in the following cases. John J. Rigas, CEO (for terms see Table 1) of Adelphia, was convicted of securities and bank fraud. Samuel Waksal, CEO of ImClone pled guilty to securities fraud and insider trading and is serving 7 years in prison. Martin Grass, CEO of Rite Aid, is serving 8 years for obstruction of justice. Frank Quattrone, influential investment banker with Credit Suisse First Boston was convicted of obstruction of justice. Jeffery Skilling, COO of Enron has been indicted on conspiracy, securities fraud, and insider trading; Enron manipulated the energy market to enrich itself at the expense of blackouts in the state of California. Dennis Koslowski, CEO of Tyco, spent $2,000,000 on a party for his second wife on the Mediterranean Island of Sardinia, and is being tried a second time for fraud and insider trading. Richard Scrushy, CEO of HealthSouth, was tried in 2005 for planning a large-scale accounting fraud. The model of business leadership for two decades, Jack Welch, CEO of GE, treated subordinates poorly and fired thousands. Welch arranged a lavish and opulent retirement for himself, as he was cheating on his second wife. Although this is a small amount of money by comparison, Martha Stewart did jail time for lying to a grand jury about information she received to sell ImClone stock before it declined, saving herself $300,000. What happened such that so many top managers so profoundly and blatantly neglected their professional and ethical responsibilities? For a mid-level manager in the above organizations, the pressure to produce financial returns was unrelenting, and the demand to compromise one’s professional ethical standards was considerable. The evidence demonstrates that the top managers of these firms had a low level of moral development. They thus placed their lower level managers under constant
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pressure to ‘‘make the numbers,’’ and this required neglecting ethical priorities. Such pressure then also makes it difficult or impossible for these men and women to develop morally. While we cannot accurately attribute motives, the actions of the above top executives indicate that their understanding of morality was primitive – probably no higher on the Kohlberg moral development scale than the morality of avoiding punishment, morality of children, or peer-based morality that is typical of adolescents.10 Each of these executives was intelligent and possessed many entrepreneurial skills. Nevertheless, given their stunted moral maturity, one might ask: How were they able to successfully climb the corporate ladder? It appears that their other executive skills were judged by top managers and Board members to be so much more important that they overlooked their moral immaturity. We can raise yet another question for the executives themselves: Why would they jeopardize the success of what they had already accomplished with such flagrantly self-centered behavior? Increasing wealth has been a goal of most Americans for generations. When asked what their major goal in life is, most people say that it is to amass a fortune or to be a millionaire. In an annual survey of U.S. college freshman, in 2003 more than 73% believed that being very well-off financially was a very important goal, while only 39% thought that developing a meaningful philosophy of life was very important. These figures are roughly reversed from when the survey was done in 1970; at that time 40% sought to be very well-off financially and 83% thought it was very important to develop a meaningful philosophy of life.11 The above attitudes influence a young person’s priorities, both as a student and when one begins one’s professional career. If one wants to be wealthy, one must be a success and ‘‘sell’’ oneself. Means taken to sell oneself range from the university one chooses, the friends one makes, the clothes one wears, and how one spends one’s leisure time. Note the emphasis here on pleasing someone else, rather than on following one’s own interests. This frame of mind then locks one into maintaining one’s self-esteem based upon the judgment of others. Such an attitude requires one to continually ‘‘sell oneself’’ in the marketplace in order to retain one’s self-esteem. Goals of greater personal wealth are strong motives for many people, and most likely were a principal motivation for the executives we discussed above. Nevertheless, we now have empirical evidence that people whose goal is obtaining more personal wealth or more social recognition have no better, and often poorer, physical and psychological health than those people who believe that such materialistic goals are less important. Research studies show that, with the exception of those who live in absolute poverty,
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increased wealth does not bring greater happiness or satisfaction. One study that followed 5,000 U.S. adults over 9 years found no significant increase in happiness or satisfaction among those who experienced a large increase in wealth.12 In another study, 22 people who won large awards from the lottery had no greater satisfaction than their less lucky neighbors. Moreover, those who were focused on material goals report ‘‘more headaches, backaches, sore muscles and sore throats than individuals less focused on such goals.’’13 These findings have been validated in many countries across the globe and also among both the wealthy and the poor. The one exception is the case of those who are destitute, and do not have sufficient food or shelter. When these people received additional income, it did increase their happiness. It is surprising to some to learn that, among people whose goal is to obtain additional wealth, they find that attaining this wealth does not satisfy them. One problem is that their goal continues to elude them, and so can never be fully attained. For example, when this person obtains an income of $150,000 and he is still unhappy, he convinces himself that $175,000 would make him happy. Achieving considerable wealth or status brings temporary satisfaction, but that satisfaction does not last. So these people plan new strategies to attain additional wealth. In addition, this pursuit of wealth and status generally distracts one from personal relationships, which might help the person to develop a sense of confidence and self-esteem.14 With regard to personal and professional goals, we find that personal financial success in affluent countries provides no apparent boost to human happiness. Hence, we face what to some may seem like a paradox: for the individual person, having fewer rather than greater personal material needs is more likely to bring happiness.15 However, in spite of the negative pressures on the manager, that person is not left alone in her attempt to maintain a moral balance.
AIDS FOR THE PROFESSIONAL There are numerous supports for the manager who seeks to maintain her professional integrity. This support can come from many of the same sources that can also be an obstacle to maintaining integrity: (1) the market, legal, and social systems, (2) the organization, and (3) personal character. Market, Legal, and Social Systems can Promote Integrity The free market encourages a business professional to maximize profits, and for all but the unscrupulous manager, this is a maximization of profits over
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the long-term. That is, if the entrepreneur or the manager desires to stay in business, she must establish and preserve a reputation for honest and fair dealing with customers, suppliers, shareholders, and all stakeholders. Maintaining such a reputation requires consistent, just, professional behavior with all these parties. Another source of support for the conscientious professional is local, national, and international legislation and regulation. Truth in advertising, minimum wage laws, and environmental regulations are examples of regulation that provide a more ‘‘level playing field’’ for all business professionals. Such regulation, in turn, supports the business professional who aims to be both successful and to have integrity. Voluntary codes of ethical conduct are another source of support for the ethical businessperson. Codes like the Caux Round Table’s Principles for Business and the United Nations’ Global Compact with Business16 articulate principles that can provide help for the professional manager on how to deal with employees, the environment, the local community, and much more. Business executives seeking to provide guidance for managers in the global marketplace developed both codes. The Caux Principles are more detailed than is the UN Global Compact. While these codes are not designed to be mandatory, and carry no sanctions, they do articulate principles and/or practices that can provide a guide for the professional manager. And both codes have mechanisms whereby executives of a firm may evaluate their own activities, and so rate their firm. The Global Compact asks a firm which signs the Compact to post a report annually on the Global Compact website describing their progress on fulfilling the Compact principles. Caux provides a detailed Self Assessment and Improvement Process (SAIP) instrument for a firm, whereby the executives of a firm can assess their own progress on the more numerous and specific Caux Principles.17
Support within the Organization The culture and climate of an organization are a major influence on the ethical behavior of the manager. If top managers of a firm possess integrity, are honest and open with information, and encourage similar behavior on the part of all in the organization, this provides a major support for the individual manager who desires to be ethical. Moreover, people in some organizations possess a more cooperative spirit; they share information and help each other succeed. Such an attitude not only increases communication and enables the organization to function better, it also supports personal
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integrity and makes that firm a more attractive place in which to work. Such an attitude was the pride of Hewlett-Packard (HP) from its founding in 1939 and was the basis for much of its creativity and innovation. Its merger with Compact under then new CEO Carly Fiorina brought many layoffs and damaged that atmosphere. Undermining this cooperative and open corporate culture was an important factor why the merged HP did not succeed, and why the HP Board in 2005 fired Fiorina, the architect of that merger. Layoffs of people are sometimes necessary. Moreover, they have become much more common in the last decade. In fact, Wall Street likes downsizings, since they lower costs and so generally bring about an increase in share price. But layoffs have a price. They bring less job security, job satisfaction, and morale. Southwest Airlines, the most profitable of the large U.S. commercial air carriers has a no layoff policy, and also has superb morale among workers. The president of Southwest says, ‘‘We are willing to suffer some damage, even to our stock price, to protect the jobs of our people.’’18 There remain a few American firms that still have a no layoff policy, among them are FedEx, S.C. Johnson, and Lincoln Electric. Executives at these firms are convinced that their no layoff policy brings stronger loyalty, the security necessary for workers to suggest ways to do their job more efficiently, and thus supports higher productivity. Otherwise, workers fear for their jobs and thus rarely make suggestions to improve productivity. So the no layoff policy results in both better worker satisfaction and morale and also better productivity. Firms, which are ‘‘family friendly’’ make it easier for their people to also meet their family obligations, and therefore provide a better environment for professional behavior. A challenging job that demands long work hours, work on weekends, and also a long commute can place great pressure on the professional. This is compounded when there are young children or if the professional is the primary caregiver for an elderly parent at home. Women bear more than their share of the work–family balancing act. Such pressure causes stress and can desensitize the individual, and thus make it easier to yield to unprofessional and unethical actions. On the other hand, a firm which is family friendly, provides the latitude for the individual to fulfill their professional responsibilities. Flextime, telecommuting, help for childcare, and advice and resources for workers on family problems can free up workers to do a less distracted and more professional job. Proctor & Gamble, Bank One, Dupont, Eli Lilly, Eddie Bauer, Motorola, American Home Products, and Union Life Insurance are all rated as family friendly by their own workers.
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Most firms have a corporate vision (and/or mission) statement and a code of ethics. Vision statements spell out ideals and aspirations. However, codes are sometimes more public relations than prescriptions of behavior to which sanctions are attached. In addition, some codes are designed primarily to protect the firm from behavior like purchasing agents who might seek kickbacks, or salesmen who might pad their expense accounts. Nevertheless, many firm’s codes set forth broad and helpful ethical guidelines for the individual professional manager. Much can be learned from what is declared in the firm’s vision, mission, and code of ethics. These proclamations can then be validated against the behavior of the firm’s executives and managers in order to see if the statements mirror activities or are designed merely for public consumption. Organizations communicate their values to new and continuing workers in a variety of ways. New employee orientation is a standard method of imparting the norms and expectations of the organization. The orientation provides indications of the real goals and values of the firm and its executives. However, what sociologists call ‘‘informal socialization’’ supplies additional, and perhaps more reliable, insights into the values and goals that are characteristic of the firm. The values that workers articulate in their stories and questions in informal settings, such as at lunch or in a snack area, provide even greater insight into the values of people in the firm. Of course, the actions of supervisors and peers are the best indicators of the values of members of the organization. A family friendly policy, some job security, and a work environment that is open and cooperative, all provide support to a person who is striving to maintain and build professional integrity. When any of these elements are lacking, it can cause anxiety and stress. Such stress can pressure a manager so that she does not notice the ethical ambiguity of sensitive issues, and, fearing for her job and career, presses ahead to obtain results. Personal Qualities that Aid Integrity The most important single personal characteristic that enables a manager to develop personal equilibrium and professional principles within an organization is that manager’s own character. Character develops over a lifetime and is made up of the composite of a person’s virtues. Virtues are good moral habits that have been developed by repeatedly performing the morally good act. By contrast, vices are bad moral habits that develop in the same way: by repeatedly performing the morally bad action.
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A manager also has a better opportunity to maintain and build integrity, if that manager has already achieved some degree of moral development. When a morally mature manager performs a moral action, the reason for performing that ethically good action is not simply pleasing one’s supervisor and peers, or even merely obeying the law, but rather because that manager has internalized her/his own moral principles.19 In this latter case one’s motivation for doing the right thing is built upon care for fellow human beings and a belief in the validity of universal moral principles, plus a personal commitment to these principles. A professional person’s spirituality is also a resource for a manager who attempts to maintain integrity. A personal spirituality can provide the manager with balance and confidence in what is often a fractious and amoral business environment. An internalized, developed spirituality can reduce anxiety and stress for a person. It enables the professional to better balance the demands that press on the person in modern society: materialism, depersonalization, elevation of the individual over the community, and the inability to escape the 24/7 demands of work. Each of these pressures, if not balanced, can lead the professional to make expedient decisions, and to override one’s own ethical principles and to undermine one’s own good moral habits. Another aspect of spirituality that can benefit the manager is to see one’s career as more than merely a job or a way to make money, but rather as a vocation. A vocation is a calling. It is a response to questions one asks oneself. Who am I? Where am I going in my life? What should I do with my life? What is worth giving my life to? When a manager is able to respond to those questions is a way that fully satisfies her, a vocation can emerge. Then what she chooses to do builds upon her deepest desires and aspirations. Finding one’s vocation brings new enthusiasm and focus to the task; it is the foundation for a clarity of thought and action, along with the inner peace that this provides.20 The family of the person and peers in the workplace generally find this person more centered, understanding, and compassionate. Having a clear sense of one’s vocation also enables the manager to more easily recognize and understand ethical issues, and it also provides the courage to act on one’s understanding. The various positive and negative influences on the individual professional within the private-sector, for-profit organizations are presented and compared in Table 2. In a case that has some similarities, let us now briefly examine the changing role of the professional in one non-profit organization: priests in the Catholic Church.
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Table 2.
Business Manager: Obstacles and Aids to Professional Behavior.
Obstacles for the Manager Free market pressure Worship of free market Power of and limited liability of the corporation Selfish behavior encouraged
Aids for the Manager Market, legal, and social system support Maintain reputation of the firm Long-term perspective encouraged Legislation and regulation Voluntary codes of conduct
Organizational culture as obstacle Self-centered executives set policy Conflict of interest
Organizational culture as support Integrity of top managers Firm’s vision and code of ethics Open, cooperative environment Family friendly firm Few or no layoffs
Personal values as obstacles Lack of moral maturity Short-term, selfish perspective Wealth and status as goals Selling of self: careerism
Personal values as aids to integrity Personal virtue and character Moral maturity Spirituality for balance Recognition of one’s call
BRIEF EXAMINATION OF OBSTACLES AND SUPPORT FOR THE PRIEST PROFESSIONAL IN THE CATHOLIC CHURCH The principal front-line professionals in the Catholic Church have been and continue to be priests. These men face many new obstacles to exercise their professional responsibilities, but they also have support for those responsibilities. Some of the pressures are similar to the pressures discussed above for the business manager. In addition, in recent years the obstacles to professional development for a priest have been exacerbated by two changes. The declining number of priests means that priests in U.S. parishes are stretched thin, and the situation is getting worse every year. And the sexual abuse scandal has caused considerable anxiety among priests. The number of priests in the U.S. and Europe is steadily declining. In 1950, a priest in the U.S. on average served 650 parishioners; in the year 2000 the average number of people that had calls on each priest almost doubled to more than 1,200. The situation is serious throughout the
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country, but is even more dire in the West and South. Moreover, the smaller number of ordinations to the priesthood is failing to provide replacements for many older priests. Nevertheless, the number of Catholics have increased during the above period from 52% in the East to 261% in the West. This situation has led to frustration for most priests, as they report that ‘‘increased administrative responsibilities and the sometimes unrealistic expectations of parishioners give them little time for the sacramental and interpersonal aspects of ministry that they find so fulfilling.’’21 The sexual abuse scandal has brought additional anxiety. In the wake of extensive media coverage, the U.S. Catholic Bishops announced a ‘‘zero tolerance’’ policy for priests. This means that if even one person accuses a priest, that priest is generally removed from his professional priestly responsibilities until the situation is resolved. Some are false accusations. Nevertheless, in those situations in which the priest is found to be not guilty, his reputation is severely tarnished. Every priest is aware of the false accusations against the late Cardinal Joseph Bernadine of Chicago. The accusations were publicized nationwide on TV and in newspapers. After some time the accuser acknowledged that his charges were false, but in the meantime much damage was done to Bernadine. He died of pancreatic cancer a few years later. The average priest knows that he could be accused at any time, and that accusation, whether true or not, would be big news where he lives and works. A priest who has little mentoring, feels overwhelmed by his duties, and feels isolated, has many obstacles to professional development. The organizational culture of the Catholic Church is hierarchical. In some cities, a bishop has responsibility for a hundred or more priests. This ‘‘span of control’’ is large by any standard. So it is difficult for the bishop to know all of his priests well. When a bishop is a wise and compassionate leader, the organizational culture aids the priest in his professional responsibilities. In those instances in which the bishop is not wise or compassionate, the hierarchical system and culture can be an obstacle to the priest performing his professional role. Personal qualities, much as we described for professionals in the private sector, can also be an obstacle or an aid to the individual priest in fulfilling his professional role. Moral maturity, character, spirituality, and recognition of one’s vocation are all essential as supports for a priest’s professional and personal integrity. However, many of these pressures differ from those in the for-profit sector. Not surprisingly, the market value of self-interest has less influence on the professional goals and activities of the priest. A priest’s success or failure is ordinarily not judged primarily by the amount of the weekly collection,
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Catholic Priest: Obstacles and Aids to Professional Behavior.
Obstacles for the Priest
Aids for the Priest
External pressures Declining number of priests Extra work demands Fear of false abuse accusation
Support from social system Less competitive environment Focused on justice and charity
Organizational culture as obstacle Bishop as single decision maker Lack of participation in decisions Weak due process
Organizational culture as support Openness and honesty of bishop Representative priest council Help from parishioners Friendship of parishioners
Personal values as obstacles Lack of moral maturity Status and advancement as goals
Personal values that aid integrity Personal virtue and character Moral maturity Spirituality as foundation Recognition of call from God
number of baptisms, marriages, or people at Mass. Once a parish is established, the bishop does not study attendance figures to rank order the ‘‘success’’ of individual priests. Nevertheless, when parishes are opened or closed, the number of people that would be or are served is an important factor. The principal support for a priest’s professional behavior is that person’s own moral maturity, spirituality, and sense of mission. Most priests choose their vocation because they want to help people, not because they wish to make money or even rise in the Church hierarchy. They also receive considerable support from people in their parishes, both when these people volunteer for necessary tasks in the Church, and also when they extend a hand of friendship (Table 3).
SUMMARY AND CONCLUSIONS The obstacles to and the support for the professional who seeks to develop honesty and integrity in the organization has been our focus. The freemarket system, especially with global competition, provides powerful pressures to cut costs, and costs are often cut in ways that do damage to suppliers, employees, or other people. Yet the demands of Wall Street analysts to increase share price are unrelenting. What some call ‘‘free market
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fundamentalism’’ provides both a rationale and an incentive to make all of one’s decisions on the basis of the dollar results that accrue to oneself and one’s own interests. In the last few years a stream of executives have confessed to inflating revenues and hiding expenses so that their firm may meet Wall Street’s earnings expectations. Many of these top executives have been indicted, tried and jailed for their unethical and illegal behavior. Even groups with special professional oversight responsibilities, such as the accounting firms, the AICPA and the New York Stock Exchange, have been caught in selfserving conflicts of interest. It is thus more difficult for the professional to work in such firms, and still retain professional ethical principles. A person’s own individual values can also be a barrier for the professional who attempts to maintain moral balance. The behavior of the executives who managed the corporate crimes – whether it was ‘‘managing the numbers,’’ insider trading, disproportionate personal compensation, and/or spending lavishly on oneself – show how these men were self-centered and unethical. Such behavior is not that of a morally mature or ethical person. On the other hand, the market, legal and social systems, the particular organization, and a person’s moral maturity each can also aid the individual professional in an organization. The market rewards the executive and firm that over the long term provides quality products, treats workers, suppliers, and shareholders with respect, and has good relations with its local community. A firm’s good reputation is one of its major assets. Legislation, regulation, and voluntary codes help to stabilize the market, so that an unscrupulous manager cannot obtain an unfair advantage. Some organizations are better than others in providing support to the individual professional who seeks to make ethical decisions. If a manager has options when seeking a job, he/she knows that it is wise to find a firm that respects all workers, uses and does not abuse the ethical skills of its people, and has open communications. Mission statements, codes, employee orientations, and worker actions all provide important information on the professional environment of the particular firm. The most important factor that helps the professional to retain and build professional integrity is that person’s own moral maturity and character. This gives a professional the equilibrium and perseverance that we saw demonstrated in Cynthia Cooper, internal auditor at WorldCom. A personal spirituality can also help the professional person build character and moral maturity; it can give a person a broader perspective and a firm foundation. A spirituality also helps the professional to see her/his work as more than a job, but something that has meaning for others, also.
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Priest professionals in the Catholic Church face a variety of obstacles to their own professional development. The shortage of priests places strains on these men. They are expected to deliver the same services to a much larger number of people, and thus suffer some of the same effects as survivors of ‘‘downsizing’’ among business firms – often being overwhelmed with work. The sexual abuse scandal and the ‘‘zero tolerance’’ policy of the bishops, has also made many priests feel vulnerable to false accusations. On the other hand, priests also have many aids to their professional development. They do not experience the same competitive market pressures found in business. They can rely more on the honesty and trust of their superiors, peers, and the people in their parishes. Their recognition of their call to this work also provides a foundation for them.
NOTES 1. Susan Pulliam and Deborah Solomon, ‘‘How Three Unlikely Sleuths Discovered Fraud at WorldCom: Company’s Own Employees Sniffed Out Cryptic Clues and Followed Hunches,’’ Wall Street Journal (October 30, 2002), p. 1, 6. Thanks to Dennis Collins who suggested the comparison of Cooper and Vinson. 2. Susan Pulliam, ‘‘How Following Orders Can Harm Your Career,’’ Career Journal (October 3, 2003); ‘‘WorldCom Employee Tells of Scam Order,’’ Washington Post, Febraury 3, 2005. 3. George Soros, Crisis of Global Capitalism (New York: Public Affairs, 1998). 4. For additional discussion of this attitude, see the author’s American Business Values: A Global Perspective, 5th Ed. (Upper Saddle River, NJ: Prentice-Hall, 2006), Ch. 1. 5. Ted Nace, Gangs of America: The Rise of Corporate Power and the Disabling of Democracy (San Francisco: Berrett–Koehler, 2003); also the earlier, well documented Tyranny of the Bottom Line: Why Corporations Make Good People Do Bad Things by Ralph Estes, Marc Raskin, and Barbara Reynolds, (San Francisco: Berrett–Koehler, 1996). 6. For a summary of many, see ‘‘Trials, Trials, Trials, and Then What?,’’ New York Times, January 8, 2004, p. C1 and C6. 7. Lynnley Browning, ‘‘Report Gives New Details on KPMB Shelters: An Accounting Firm is Publicly Contrite in the Face of Senate Hearings,’’ New York Times, February 11, 2005, p. C3. 8. For a comprehensive treatment of conflict of interest, see Andrew Stark, Conflict of Interest in American Public Life (Cambridge: Harvard University Press, 2000). While Stark focuses on the elected and appointed government official, a major player is the business firm, which seeks special privileges from the local or federal government official. 9. Arthur Schwartz, ‘‘Always on the Job: Employees Pay with Health,’’ New York Times, September 5, 2004, p. B1; ‘‘Attitudes in the American Workplace,’’ (Harris Poll, 2001).
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10. Laurence Kohlberg, ‘‘The Cognitative Developmental Approach to Moral Education,’’ in Readings in Moral Education, ed. Peter Scharf (Minneapolis: Winston Press, 1978), pp. 36–51, and the excellent adaptation of Kohlberg’s model by William Damon, ‘‘The Moral Development of Children,’’ Scientific American, August 1999, pp. 73–78. 11. ‘‘Disengaged Freshman: Interest in Politics among First-Year Students is at a 29-Year Low,’’ Obtained from www.gseis.ucla/edu/heri/darcu_pr.html on 7/10/2004. 12. E. Diener, E. Sandvick, L. Seidlitz and M. Diener, ‘‘The Relationship between Income and Subjective Well Being: Relative or Absolute?’’ Social Indicators Research 28(1993): 195–223. 13. Tim Kasser, The High Price of Materialism (Cambridge, MA: MIT Press, 2002), p. 110; and Robert E. Lane, The Loss of Happiness in Market Democracies (New Haven: Yale University Press, 2000). 14. Kasser, p. 72; see also Mihaly Csikszentmihalyi, Good Business: Leadership, Flow, and the Making of Meaning (New York: Viking, 2003), and Martin E. P. Seligman, Authentic Happiness (New York: Free Press, 2002). 15. David G. Myers, ‘‘The Funds, Friends, and Faith of Happy People,’’ American Psychologist 55(January, 2000): 56–67; and his The Pursuit of Happiness (New York: William Morrow, 1992), pp. 39–41. 16. The websites for these two are: http://www.cauxroundtable.org/principles.html and http://www.unglobalcompact.org/Portal/ 17. Kenneth E. Goodpaster, T. Dean Maines, and Michelle D. Rovang, ‘‘Stakeholder Thinking: Beyond Paradox to Practicality,’’ Journal of Corporate Citizenship 7(Autumn, 2002): 93–111. 18. ‘‘Where Layoffs Are a Last Resort,’’ Business Week, October 8, 2001, p. 42. 19. Laurence Kohlberg, ‘‘The Cognitative Developmental Approach to Moral Education,’’ in Readings in Moral Education, ed. Peter Scharf (Minneapolis: Winston Press, 1978). 20. Joseph Weiss, Michael Skelley, Douglas (Tim) Hall, and John C. Haughey, ‘‘Vocational Calling, New Careers, and Spirituality,’’ in Moses Pava and Patrick Primeaux, eds., Spiritual Intelligence at Work: Research in Ethical Issues in Organizations (Amsterdam: Elsevier, 2003), pp. 175–201. 21. These data are from three studies commissioned by the U.S. Catholic Bishops and reported on their website: http://www.usccb.org/comm/archives/2000/00-132.shtml accessed 2 March 2005.
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CURRENT ETHICAL DILEMMAS OF ADVERTISING PROFESSIONALS Deborah Y. Cohn ABSTRACT Taxonomies (e.g., classification schemes) are valuable in that they clarify and create conceptual and theoretical frameworks to integrate a large variety of research (Brinkmann, 2002; Crie´, 2003). In addition, taxonomies draw attention to the importance of a subject and provide a framework for organizing what we know and what we have yet to explore (Berenbaum, Raghavan, Le, Vernon, & Gomez, 2003). This article develops a taxonomy to explore the ethical considerations of advertising professionals. A netnographic study was conducted and the results are presented. A taxonomy is developed in which advertising practitioner concerns are classified into four categories: (1) societal impact, (2) industry norms and rules, (3) my ethical dilemmas, (4) others’ behavior, and (5) industry responses. This research supports and extends previous academic research into advertising ethics.
INTRODUCTION Annually, the Gallup Organization releases a poll in which respondents are asked to ‘‘rate the honesty and ethical standards of people inydifferent Crisis and Opportunity in the Professions Research in Ethical Issues in Organizations, Volume 6, 149–168 Copyright r 2005 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 1529-2096/doi:10.1016/S1529-2096(05)06008-6
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fields.’’ Ranked the lowest are the car salesmen and just above them are the advertising practitioners (Moore, 2004). In the past year, the advertising industry has come under attack for such issues as fueling obesity and bingedrinking, and for improper billing and accounting (e.g., inflating time sheets) (Sanders, 2005; Tylee, 2004). However, these attacks are coming from outside of the industry. This may be telling about what people think about advertising and those who create it. However, it is not telling of the ethical dilemmas that advertising professionals currently face in the work place. Recently, a special issue of the Journal of Business Ethics was devoted to ethical issues of the advertising industry. It was suggested that due to the digital revolution and other current changes in the advertising industry ‘‘there are no benchmarks for ethical practices.’’ Furthermore, ‘‘additional dimensions of privacy, intrusiveness, and misrepresentation issues evolve constantly, all while under the microscope of public scrutiny’’ (Beltramini, 2003). Due to these evolving changes in the advertising industry the time is right to examine the ethical issues faced by practitioners. In terms of organization, first, this article will briefly review the academic literature on the topic of advertising ethics. Second, the value of taxonomies is presented. Next, an exploratory netnographic study is presented in which the current concerns of advertising professionals are explored and classified into a taxonomy. Third, a theoretical discussion of the findings is presented. Finally, suggestions are made for future research and conclusions are drawn.
BACKGROUND Limited research has focused on the ethical dilemmas faced by advertising practitioners. There is a research that uses scenarios to assess the perception of the ethics of certain behaviors (e.g., Davis, 1994; Ferrell, Zey-Ferrell, & Krugman, 1983; James, Pratt, & Smith, 1994; Pratt & James, 1994). The research that has addressed practitioners ethical decision making has surveyed practitioners to ascertain perceived ethical problems (Hunt & Chonko, 1987; Rotzoll & Christians, 1980). Advertising practitioners’ face ethical dilemmas in terms of product/service, content of advertising messages, the choice of target audience, and the agency–client relationship (e.g., Hyman, Tansey, & Clark, 1994; Rotzoll & Christians, 1980; Shaver, 2003). Ethical dilemmas faced by advertising professionals were last explored by limited research in the 1980s (e.g., Hunt & Chonko, 1987; Rotzoll
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& Christians, 1980). Therefore, ethical issues of advertising professionals are being raised again to explore them in the current advertising environment. Currently, research evidence suggests that ‘‘significant numbers of practitioners either do not see ethical dilemmas that arise or their vision is shortsighted’’ (Drumwright & Murphy, 2004, p. 7). In addition, Drumwright and Murphy (2004) found that even in situations in which ethical issues are recognized, there is little communication about them within the advertising agency in which the situations arise. Recently (July 2004), an Internet forum for advertising and marketing practitioners was created to allow for discussion of a variety of advertising topics, including ethical dilemmas. Although practitioners are not discussing their ethical dilemmas within their agencies (Drumwright & Murphy, 2004), they are discussing them on Internet forums. The articles in the special issue of the Journal of Business Ethics devoted to ethics in the advertising industry employed scenarios with students, defined as ‘‘potential advertising employees’’ (e.g., Keith, Pettijohn, & Burnett, 2003) and students who could assess the advertising industry from the point of view of consumers (Beard, 2003; Fam & Waller, 2003). In addition, professionals outside of the industry were asked to judge the actions of advertising professionals (e.g., health care professionals) (Parker & Pettijohn, 2003). In addition, articles focused on theory building (e.g., Millar & Choi, 2003; Shaver, 2003) and issues related to the effects of advertising on society (e.g., Cunningham, 2003). Shaver (2003) suggested that there is a ‘‘paucity of scholarly focus in the area of theory-buildingyfrom which researchers can design empirical studies to quantify and refine the understandingyof professional ethics to the practice of advertising’’ (Shaver, 2003, p. 292). Shaver (2003) developed a classification of ethical advertising messages and a framework to evaluate the balance of power in the relationship between the advertising practitioner and the community or communities they serve. In addition, Millar and Choi (2003) developed a framework for ethical advertising behavior based on type of good, moral issues and link to knowledge intermediary. Still further, Brinkmann (2002) developed a typology of marketing ethics. One component of this typology was the ethics of advertising practitioners. Brinkmann (2002) included in her typology four approaches to professional ethics including: (1) moral conflict, (2) professional code, (3) professional role morality, and (4) moral climate. This article extends the work of Shaver (2003), Millar and Choi (2003), and Brinkmann (2002) to include a taxonomy of topics discussed by advertising professionals which relate to ethical decision making within their field.
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THE VALUE OF TAXONOMIES Taxonomies are valuable in that they clarify and create conceptual and theoretical frameworks to integrate a large variety of research (Brinkmann, 2002; Crie´, 2003). In addition, taxonomies draw attention to the importance of a subject and provide a framework for organizing what we know and what we have yet to explore (Berenbaum, Raghavan, Le, Vernon, & Gomez, 2003). Taxonomies can be found in all areas of research. In fact, a search on a computerized database (i.e., Proquests 2004) with the search terms ‘‘a taxonomy of’’ in the title of peer reviewed articles yields 127 original articles ranging from 1968 to the present. These articles are found in a variety of research fields including business, psychology, economy, and health. Since the early days of the study of marketing, marketing researchers have been using classification systems to help guide the formation of strategy. For example, found in most college marketing textbooks, the Market Share/ Market Growth Matrix acts as a tool for marketing planning. Therefore, not only does the development of a taxonomy assist in theory building as it acts as a guide to future research, it assists in strategy building as it acts as a guide for business professions. The taxonomy presented here is no less powerful than any of the taxonomies that have come before it. Its purpose is to organize the ethical dilemmas of advertising professionals into a framework that draws attention to the importance of current ethical trends and will act as a guide to advertising professionals and future researchers.
THE STUDY Method This research employed the netnographic method of collecting publicly available online texts which are downloaded from the Internet. Netnography, a term first employed by Kozinets (1997) is defined as Internetrelated field work similar to ethnography. Netnography uses publicly available information from the Internet in order to gain access to naturally occurring behavior. Furthermore, netnography is naturalistic and unobtrusive (Kozinets, 2002). Employing the netnographic method, publicly available Internet texts were searched and analyzed. Comments posted in an online forum by advertising practitioners were culled and analyzed for ethical considerations.
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Data Collection Soflow’s Adrants Network is an online network and forum for advertising and marketing professionals from around the world. The Adrants Network which began in July of 2004 is defined as being ‘‘for marketers who appreciate both the brilliance and the idiocy of the media and advertising industriesythe place for discussion on questionable, absurd, new, and noteworthy happenings. Members discuss issues relating to marketing, advertising, public relations, creative, production, sales, trends, celebrity endorsements, viral activities, and more.’’ This analysis will focus on the ‘‘questionableyhappenings’’ that are raised in the forum between February and March 2005. This network currently has 1,612 members from across the globe (as of March 16 2005). This forum was the perfect place to gain an understanding of the issues facing advertising professionals. First, I perused the discussion topics and responses for ethical dilemmas facing the members. In addition to the naturally occurring posts on the forum, I posted a question to the members: I am interested in the topic of ethical dilemmas faced by advertising and marketing industry professionals. I would appreciate it if any of you could furnish me with examples of ethical dilemmas that you have faced recently. I understand if you don’t want to provide specifics of names and dates. I promise I will maintain your anonymity and confidentiality. I appreciate any insight you can provide.
Six responses to this query were posted on the forum and an additional 8 responses were received privately either on the Soflow network or to my private email. These responses will be classified as well.
RESULTS As expected, ethical issues are raised and discussed on the Adrants Network. The way in which the topics are discussed can be classified into five categories: (1) societal impact, (2) rules to live by, (3) my ethical dilemmas, (4) others behaviors, and (5) industry responses to ethical issues. Each of these will be discussed. Societal Impact It has been suggested that advertising has a negative impact on society. This negative impact is both economic and social (Shaver, 2003). The following
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quote from the Adrants Network is an example of the way in which advertising professionals grapple with their role in contributing to the negative force of advertising: Is there too much advertising for advertising’s own good? Have we become too focused on the tactics that we’re losing the bigger picture? Are we creating an over-advertised world for our children, where they even have to worry that every conversation they’re having is really a paid advertisement? And, if this is all true, then what’s the answer?
This advertising professional is concerned about creating a world in which there is too much advertising. He is concerned with the impact his actions have on society as a whole and he is trying to start a dialogue about what can be done about it. Furthermore, it has been suggested by those outside the advertising profession that advertising creates ‘‘demand for unneeded goods, and promotes unhealthy cultural values’’ (Shaver, 2003, p. 292). Advertising professionals recognize this concern. It is voiced in the following post: If I lived the life that all these advertisers were pitching to, I think I’d be as bereft of a meaningful life as any sneaker, beverage or vehicle made. They’re just products, things, toys and stuff; they don’t make you a better person, and that’s the sad destructive truth of the seduction of this mess.
Still further, the negative perception of the advertising industry is evidenced by this marketing professional: As a person in marketing I’m starting to experience what used car salespeople and lawyers have been going through for years. It won’t be long before the marketing guy jokes proliferate and accelerate the fast-declining repute of our profession. So for me, the biggest issue in marketing is retaining some semblance of respect for the discipline. Did I say ‘discipline?’ Oh God, I’m sorry, I meant ‘scam!’
As suggested above, advertising professionals are ranked just above the car salesmen in terms of honesty and ethical standards (Moore, 2004). Therefore, it is not surprising that marketers are feeling this harsh judgment.
Industry Norms and Rules Generated based on experience in the advertising industry, these norms and rules encompass the ethical as well as the unethical. One member of the Adrants Network reiterated a famous quote from David Ogilvy (1911–1999), an oft-quoted long time admired advertising professional: Never write an advertisement you wouldn’t want your own family to read. You wouldn’t tell lies to your own wife. Don’t tell lies to mine.
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According to Wikiquote, an online compendium of quotations and their sources (Wikiquote.org), this quote is in fact attributed to David Ogilvy. The norm that can be derived from this quote is: do not lie. One discussion centered on the value of giving away free services and what you get in return. This idea is summarized in the following quote from an Adrants member: Karma. What goes around comes around. The golden ruleyIts sorta (sic) the way I look at these boards: We all give a little (knowledge, experience, humor, ideas, passion, peeves, etc.)yand we all stand to gain a lot from the collective wisdom assembled here.
A similar sentiment was raised by another member: You could take it a step further and work on the pay it forward principle you do someone a good turn and they then pay that good turn forward to two or more people thus creating a virtuous circle.
Pay it forward is a way of life that is expected to create virtue in the world. Additional rules suggested in replies to the direct question posted on the network included an admonition ‘‘not to ‘trash’ the competition.’’ This sentiment is further stated in the following rule: ‘‘I always sell our benefits as opposed to stating my competitor’s weaknesses.’’ The question of adopting blogs as a media channel arose and professionals proposed rules to deal with the situation. Bloggers rant against corporate blogs as if their blogging territory should be free of ‘‘evil advertisers.’’ However, the advertising community is looking for ways to use blogs as a media channel. One practitioner requested rules with regard to blogs and advertising. The following is a response: People have been buying advertorial (in fact advertising presented as editorial) on blogs for over 4 years. I’ve worked on campaigns where over 30 blogs were paid. The important don’t is don’t get caught. The important do – know who you can pay and know what sites work.
This marketer is stating that in order for this media channel to work you have to be deceptive. Not exactly a golden rule, but the suggestion of a norm for the blogosphere.
My Ethical Dilemmas A second set of responses and posts can be described as ‘‘My Ethical Dilemmas.’’ In many of these posts there is no conclusion about the right way to handle these situations. However, these members discuss their ‘‘ethical
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tugs.’’ The issues can be classified by (1) content and target audience, (2) agency/client relationship, and (3) media channels. Adrants members discuss content and target audience ethical dilemmas. For example, a question is raised, is it right to promote this product to this audience? In all cases these products are legal and their agencies stand to make a profit on these accounts. Practitioners question if they should ‘‘work on a Tobacco account when (holding) an anti-smoking stance but my Agency tells me it’s the most profitable account there is and therefore it would be in my ‘interest’ to do so.’’ Furthermore, they question working on fast food accounts, fund-raising accounts (e.g., if the funds raised do not always go to the people who need it the most), and for ‘‘credit card companies that want me to run marketing programs on college campuses.’’ In terms of message content, one practitioner offered this: I work on the client side of the Advertising process, and ethics is always in the forefront of my mind when writing and producing advertising. The challenge in my experience is that Sales usually doesn’t care about the accuracy of the content, but is more concerned about making the phone ring no matter what is said in the ad.
This quote emphasizes truthfulness in message content. The second group of issues are classified as agency/client issues. Adranters suggested the following issues in this area: Recent dilemmas colleagues and I have faced: – attempting to on-charge every cost incurred during a project, including meals/drinks etc. ywhen working late for whatever reason (whatever happened to the cost of doing business?!). – fudging presentations to clients by rehashing the same stuff presented 2 years ago, or worse, to a key competitor, but still charging full rates for strategic development. – working with a client who has a reputation for human rights abuses in developing nations.
The third classification of ethical issues has to do with media channels. A frequently discussed dilemma has to do with the promulgation of word of mouth (WOM) advertising. ‘‘Word of mouth marketing encompasses dozens of marketing techniques that are geared toward encouraging and helping people to talk to each other about products and services’’ (WOMMA.com). On the rise as an advertising technique, WOM has been criticized for being deceptive (e.g., Walker, 2004). In the past, WOM was an outcome of a great product and consumers who wanted to talk about it. How to get consumers to talk about brands has been discussed in books by Seth Godin (e.g., Purple Cow, and Permission Marketing) and Malcolm Gladwell’s Tipping Point. These authors, among others, encourage marketers to create brands that are so unique that consumers will naturally spread the word. The difference between the purple cow and companies like Tremor and BzzAgent (WOM
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companies) is the external reward for spreading the word about brands. In some cases, WOM advertising or buzz marketing is not perceived as advertising by consumers. Yet, once this practice is revealed it can be deemed deceptive. Tremor, the Proctor & Gamble WOM unit recruits consumers as young as 13 to talk about products (Walker, 2004). One of the members of the Adrants Network sent this comment in an email: As the owner of a buzz marketing agency that works with teens and tweens daily, I’ve encountered this ethical tug of war almost daily.
She is concerned about her practice of recruiting teens and tweens as media channels for marketing efforts, and yet she continues to generate revenue from this activity. Others’ Behaviors The second type of ethical concern is classified as finger pointing at others’ behaviors. These practitioners are concerned about what others in the industry are doing. Similar to ‘‘my ethical dilemmas’’ these issues are classified by (1) content and target audience, (2) agency/client relationship, and (3) media channels. In terms of media choices, topics discussed included the deceptiveness of advertainment, contextual advertising, and WOM. Advertainment is defined as ‘‘an interactive entertaining online advertisement; i.e. an interactive product demonstration, a branded game, or some other engaging presentation which identifies the sponsor and involves the viewer (http://www. revolution.ca/knowledge/glossary.cfm?t=205). One advertising professional commented on ‘‘advertainment and the way marketing messages are being surreptitiously placed in entertainment and many other locations.’’ Advertainment is ethically questionable in cases in which the sponsor is not clearly identified. Contextual advertising, defined as ‘‘sponsored links that appear next to related non-search-engine-generated content, such as news article’’ (http://www. adwordprofitsoft.com/glossary.htm), is raised as questionable ethical behavior: ythe New York Post has started usingytechnology which matches words in articles to advertisers and then links those words to a rollover ad. What is the groups thoughts on this? Ethical? Unethical?
The responses to this post included: Is it ‘unethical’? I think that might be a bit muchybut seriously, how far away are we from having news broadcasts being sponsored by a company? I can see watching my
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favourite (sic) broadcast only to be interrupted to bring you the ‘Coke live news exclusive.’ It will become harder and harder for news agencies to remain neutral (oh, waitywe’ve already passed that point?!). The ethical side of this comes into crystal clear Poland Springs view when you imagine an editorial writer, using a new Apple Mac mini, choosing words for her story to fatten ad revenue for the New York Post. I think at that momentythis becomes an ethical issue.
The concerns with contextual advertising center on the questions of deception and bias. We expect our news reporters to be unbiased and objective. The question raised is whether introducing a system in which the news media get paid for mentioning brands will lead to biased reporting. The issue of ‘‘click fraud’’ is discussed. Click fraud is defined as ‘‘a scam involving setting up a website affiliated with a major search engine, displaying pay-per-click advertising from the search engine and then using various methods to fraudulently increase the number of clicks to the advertiser from the affiliate website. The affiliate website receives a portion of the money generated by the click throughs even though the clicks were not generated by genuine customers’’ (Wikipedia.org). Advertising practitioners are concerned that others are involved in this practice: I’ve heard people claim that click fraud in Pay Per Click search advertising accounts for between 10–50% of clicks, depending on the provider. How bad is it? Do you have any experiences that you’d like to share? It’s pretty bad. There is no current legislationy. I have heard of PR firms clicking on rivals linksy. The result, big bills and legals. Click fraud relates to the pay per click (PPC) text ads that you see on the side of search results and publication. Every time an ad is clicked the advertiser is charged. Click fraud is when a third party creates fake clicks to either cost their competitor money or in the case of the publisher who’s running the ads, to make money.
The practice of click fraud is a concern of advertising industry professionals, particularly since it is feared that this fraudulent behavior performed by others will effect their bottom line. An advertising professional asked about ‘‘ad creep.’’ This made up term, ‘‘ad creep’’ implies that there is something wrong with the practice: I’d like to find out how people feel about the idea of ‘ad creep,’ particularly those that fly under our radar. Product placement is one example, but it’s been so overdone that it’s, perhaps, becoming a mainstream mediumy. Can anyone think any other form of ‘ad creep’?
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The following is a response from an advertising professional who is concerned about WOM advertising: yadcreep is a major issue today. Just got back from the WOMMA Summit and it was oddly one topic that wasn’t highly discussed. The idea that advertising is potentially creeping into every conversation that we might be having is pretty scary! I mean, the whole concept of turning WOM into a advertising vehicle can be preety (sic) unnerving! yespecially as it relates to children.
Advertising professionals engaged in turning WOM into an advertising vehicle are concerned about their behavior, especially with the use of children. Furthermore, advertising professionals who see others engaged in this practice point a finger and question the ethics of this behavior. In the next section, the code of ethics developed by the Word of Mouth Marketing Association (WOMMA) will be discussed. Industry Responses to Ethical Issues The fifth type of response encompasses what is being done by the advertising industry (e.g., professional associations) to avoid unethical behavior by the practitioners. As suggested by Beltramini (2003), within the industry there is evidence of the creation of codes of ethics. WOMMA ethics code is a topic of discussion on the Adrants Network. As a result of WOM’s growing popularity, the industry association, WOMMA was formed. WOMMA claims that the organization ‘‘is leading the efforts to improve WOM marketing as an effective technique and as a core part of the marketing mix’’ (WOMMA.com). In addition, WOMMA has developed a new code of ethics for this industry: The WOMMA Ethics Code is the first effort to draft guidelines that ensure that word of mouth marketing industry is build on a basis of sound ethical principles. The WOMMA Code was first published on Feb. 9, 2005. The essence of the WOMMA Code comes down to the Honesty ROI: Honesty of Relationship: You say who you’re speaking for; Honesty of Opinion: You say what you believe; Honesty of Identity: You never obscure your identity (WOMMA.com).
The complete WOMMA code of ethics is published on the WOMMA website and is included in the Appendix at the end of this article. At the time that WOMMA was developing the code of ethics document, a member of WOMMA posted an announcement on Adrants: WOMMA published a draft of its Word of Mouth Marketing Code of Ethics this morning.y We believe that this publication is an important first step in building an industry based on a foundation of ethical principles and consumer respect.
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By no means should this be taken as a final document. It is a first step in a complex process. All interested parties are invited to comment and participate in the revision and improvement of the WOMMA Code.y Not everyone will agree with the details, but getting the conversation started is a worthy goal. Full details and the comment process are available at http://www.womma.org/ethics.htm
Members of the Adrant network were unhappy with the WOMMA Code of Ethics for two reasons: (1) authors and (2) minors. First, they felt that additional industry associations should have been involved of the formulation of the code: yhow about inviting the other larger association in this field to participate in the formulation of these guidelines rather than take.yunilateral action! Check out www.vbma.net look at the members list and then check out www.womma.com now count the number of their members and then tell me why it should be left to one group to regulate this when there is another group out there who have been knocking on WOMMA’s door to participate.
It was suggested that the members of the Viral and Buzz Marketing Association (VBMA) should have been included in the drafting on the ethics code. Next, Adrants Network members were unhappy with the code that was published by WOMMA due to concerns in which teenagers are involved in WOM campaigns as the spreaders of branding messages: ydoes someone else think that all this crap (sic) that WOMMA keeps going on about deception is just a smokescreen to take the spot light away from the minors issue ycan you explain why you think it is acceptable for marketing companies to engage children of 13 in marketing activities without parental consent. Please bear in mind that we are talking about marketing with children not marketing to them. yThis code said nothing about teens being marketing without parental consent. How on earth couls (sic) that be legal? The code on conduct I read (and quoted) talked about honesty in advertising – IF what you say is true, that WOMMA promotes marketing teens without parental consent – that in itself is against their own published code on conduct since is certainly isn’t a honest approach.
The concern was about teenagers over the age of 13 who should also be protected from this practice. Still further, Adrants members were critical of WOMMA suggesting that business in general and advertising in particular already have ethical codes.
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Therefore, developing an additional ethical code is akin to reinventing the wheel. A more practical industry solution was offered: I think a WOM code of ethics is pretty defeatist, and a clear indication that those people are wasting valuable time and money. Every good business should subscribe to at least a common code of ethics. This wheel has already been invented, both for businesses in general, and for companies in both advertising and marketing. Why waste time rewriting those rules for every subsection of a business community? Wanna (sic) show me you’re really trying to help the WOM business community? Don’t spend all this time on a code of ethics – spend that time developing a strategy to help raise awareness of protecting kids from deceptive WOM techniques, and distribute it free to schools and activist groups.
The WOMMA code of ethics was developed as an industry response to possible unethical practices within the WOM advertising industry. It was criticized by advertising professionals for being created by just one association and not including others in the development of the code. Furthermore, it was criticized for issues involving children. The WOMMA code suggested that advertising practitioners should not seek children under the age of 13 to participate in WOM campaigns. Advertising practitioners on the Adrants Network felt that teenagers between the ages of 13 and 16 should also not be allowed to participate without parental consent. Furthermore, it was suggested that programs should be developed to raise awareness so that children understand about advertising in general and WOM in particular. Table 1 summarizes the classification scheme discussed above. Each of the categories are shown with a definition and representative quote from an Adrants Network participant.
DISCUSSION Marketing managers tend to make decisions in regards to ethical dilemmas by referring to deontological norms (i.e., values about right and wrong) and teleological principles (i.e., consequences, probability of consequences, desirability of consequences, and importance of each stakeholder group) (Hunt & Vitell, 1986). It has been suggested that the deontological norm (e.g., deceptive advertising is wrong) must be believed in order for neutralization techniques (e.g., rationalizations for unethical behavior) to be activated (Eliason & Dodder, 2000). In contrast, research tests of ethical models (Hunt & Vitell, 1986) suggest that teleological decision processes seem to be more relevant to those who perform unethical acts. In examining
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Table 1.
Taxonomy of Ethical Issues of Advertising Professionals.
Classification
Definition
Representative Quote
Societal impact
The impact of advertising on society
Industry norms and rules
Ethical rules that advertising practitioners have adopted
My ethical dilemmas
Ethical issues that advertising professionals currently encounter
Others’ behavior
Questionable ethical behaviors that advertising practitioners see others engaged in
Industry responses
Advertising industry responses to ethical concerns
‘‘Are we creating an overadvertised world for our children?’’ ‘‘Never write an advertisement you wouldn’t want your own family to read. You wouldn’t tell lies to your own wife. Don’t tell lies to mine.’’ (David Ogilvy) ‘‘As the owner of a buzz marketing agency that works with teens and tweens daily, I’ve encountered this ethical tug of war.’’ ‘‘I don’t know what a lot of others are doing (except for BzzAgent and, frankly, I think that model is the antithesis of ‘ethics’)’’ ‘‘Womma published a draft of its Word of Mouth Marketing Code of Ethics’’
ethical dilemmas of advertising professionals, deontological norms are discussed. Norms concerning deception, pay it forward, and the golden rule were suggested. Teleological principles also come into play as advertising practitioners discuss societal consequences of advertising. Societal impact and industry norms encompass global issues. For example, professionals are concerned with their profession’s impact on society and cultural values. In terms of industry norms, global norms are raised such as deception, golden rule, pay it forward, and don’t get caught. These could certainly be extended into other industries. The distinction is made between ethical dilemmas that professionals grapple with and those behaviors that they see others doing that they would deem to be unethical. In both of these areas, questions of advertising ethics are found in message content, agency/client relationships, and media choices. The findings in this study support previous research by Rotzoll and Christians (1980) who found evidence of content and agency/client relationships as dimensions of ethical decision making. In addition, Shaver
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(2003) is supported in the suggestion that moral reasoning by advertising professionals falls mostly in the areas of content, delivery (e.g., media), and target audience. Millar and Choi (2003) developed a framework for ethical advertising behavior based on type of good, moral issues, and link to knowledge intermediary. This article extends the work of Millar and Choi (2003) to include a taxonomy of topics discussed by advertising professionals which relate to ethical decision making within their field. This taxonomy includes the impact on society, industry norms, my ethical dilemmas, other’s behavior, and industry responses. In the area of ‘‘my ethical dilemmas’’ personal ethics come in conflict with economic concerns. In this area, issues of deception and exploitation are raised. These take the form of deception between client and agency as well as being involved in a deception between advertiser and consumer. Further, issues involving target audience (e.g., teens) and media choice (e.g., WOM) are raised. Practitioners who are involved in WOM marketing who recruit teens to participate in campaigns admit that this poses an ethical dilemma. In terms of ‘‘other’s behaviors,’’ issues of deception are also raised. These took the form of advertainment, contextual advertising, and click fraud. Word of mouth, especially as it relates to deception and exploitation of teens was raised in ‘‘my ethical dilemmas’’ as well as ‘‘other’s behaviors.’’ The last classification is the industry responses. As can be expected of many industries, ethical codes are developed as industries change and grow. This research supports the work of Brinkmann (2002) in the finding that codes of ethics are developed in order to address desirable and undesirable behavior. In this context, a code of ethics was developed for word of mouth advertising. Although practitioners suggested that WOM advertising posed ethical problems (e.g., deception, involvement of children), they generally responded unfavorably to the code that was proposed by WOMMA. They felt it did not protect children enough and that it was doomed to be ineffective considering the widespread problem.
CONCLUSIONS, LIMITATIONS, AND SUGGESTIONS FOR FUTURE RESEARCH Although the Adrants Network is a large group of advertising and marketing professionals from around the world, they have self-selected to participate in this network. Therefore, one might question whether the
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Adranters and their willingness to discuss ethical issues are representative of the general population of advertising professionals. It is therefore suggested that this framework should be further verified with other advertising professional populations online as well as in the real world. Furthermore, it is suggested that the classification scheme developed here can be used to evaluate the concerns of professionals in diverse business fields. Further research could test this applicability to other business settings. The framework presented in this article leads to greater understanding of current trends in ethical problems faced by advertising professionals. Future research can be conducted to further understand the decision making of professionals facing these situations. Although there is some evidence of the use of neutralization techniques (e.g., Sykes & Matza, 1957) in the postings in Adrants, full support for their use is not evaluated. However, it is possible that these techniques are employed by advertising professionals who are not behaving ethically. Future research can assess the use of these techniques with in-depth qualitative interviews and additional netnographic studies with advertising professionals. In conclusion, the taxonomy presented here is designed to provide advertising professionals and researchers with a framework that will assist them in their efforts to systematically explore advertising ethics as well as a starting point for theory building concerning advertising ethics.
REFERENCES Beard, F. (2003). College student attitudes toward advertising’s ethical, economic, and social consequences. Journal of Business Ethics, 48(3), 217–228. Beltramini, R. (2003). Advertising ethics: The ultimate oxymoron? Journal of Business Ethics, 48(3), 215–216. Berenbaum, H., Raghavan, C., Le, H. N., Vernon, L., & Gomez, J. J. (2003). A taxonomy of emotional disturbances. Clinical Psychology: Science and Practice, 10(2), 206. Brinkmann, J. (2002). Business and marketing ethics as professional ethics. Concepts, approaches and typologies. Journal of Business Ethics, 41(1/2), 159–177. Crie´, D. (2003). Consumers complaint behaviour. Taxonomy, typology and determinants: Towards a unified ontology. Journal of Database Marketing & Customer Strategy Management, 11(1), 60–79. Cunningham, A. (2003). Autonomous consumption: Buying into the ideology of capitalism Anne Cunningham. Journal of Business Ethics, 48(3), 229–236.
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Davis, J. J. (1994). Ethics in advertising decision making: Implications for reducing the incidence of deceptive advertising. The Journal of Consumer Affairs, 28(2), 380. Drumwright, M. E., & Murphy, P. E. (2004). How advertising practitioners view ethics: Moral muteness, moral myopia, and moral imagination. Journal of Advertising, 33(2), 7–24. Eliason, S. L., & Dodder, R. A. (2000). Neutralization among deer poachers. The Journal of Social Psychology, 140(4), 536–538. Fam, K. S., & Waller, D. S. (2003). Advertising controversial products in the Asia Pacific: What makes them offensive? Journal of Business Ethics, 48(3), 237–250. Ferrell, O. C., Zey-Ferrell, M., & Krugman, D. (1983). Comparisons of predictors of ethical and unethical behaviors among corporate and advertising agency managers. Journal of Macromarketing, 3(Spring), 19–27. Hunt, S., & Chonko, L. (1987). Ethical problems of advertising agency executives. Journal of Advertising, 16(4), 16–24. Hunt, S. D., & Vitell, S. J. (1986). A general theory of marketing ethics. Journal of Macromarketing, 6(1), 5–17. Hyman, M. R., Tansey, R., & Clark, J. W. (1994). Research on advertising ethics: Past, present, and future. Journal of Advertising, 23(3), 5–16. James, E. L., Pratt, C. B., & Smith, T. V. (1994). Advertising ethics: Practitioner and student perspectives. Journal of Mass Media Ethics, 9(2), 69. Keith, N. K., Pettijohn, C., & Burnett, M. S. (2003). An empirical evaluation of the effect of peer and managerial ethical behaviors and the ethical predispositions of prospective advertising employees. Journal of Business Ethics, 48(3), 251–265. Kozinets, R. (1997). I want to believe: a netnography of the x-philes’subculture of consumption. Advances in Consumer Research, 24, 470–475. Kozinets, R. (2002). The field behind the screen: Using netnography for marketing research in online communities. Journal of Marketing Research, 39(1), 61–72. Millar, C., & Choi, C. J. (2003). Advertising and knowledge intermediaries: Managing the ethical challenges of intangibles. Journal of Business Ethics, 48(3), 267–277. Moore, D. (2004). Nurses top list in honesty and ethics poll. The Gallup Poll Tuesday Briefing, (December), 34. Parker, S., & Pettijohn, C. E. (2003). Ethical considerations in the use of direct–to–consumer advertising and pharmaceutical promotions: The impact on pharmaceutical sales and physicians. Journal of Business Ethics, 48(3), 279–290. Pratt, C. B., & James, E. L. (1994). Advertising ethics: A contextual response based on classical ethical theory. Journal of Business Ethics, 13(6), 455–469. Rotzoll, K. B., & Christians, C. G. (1980). Advertising agency practitioners perceptions of ethical decisions. Journalism Quarterly, 57(Autumn), 425–431. Sanders, L. (2005). Effects beyond ogilvy. Advertising Age, 14(February), 74. Shaver, D. (2003). Toward an analytical structure for evaluating the ethical content of decisions by advertising professionals. Journal of Business Ethics, 48(3), 291–300. Sykes, G. M., & Matza, D. (1957). Techniques of neutralization: A theory of delinquency. American Sociological Review, 22(December), 664–670. Tylee, J. (2004). The year in review: 2004: You couldn’t make it up. Campaign, 17(December), 4–5. Walker, R. (2004). The Hidden (In Plain Sight) Persuaders. New York Times Magazine, 5 December, pp. 68–75, 104, 130–131.
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APPENDIX The WOMMA Code (womma.com) 1. Consumer protection and respect are paramount We respect and promote practices that abide by an understanding that the consumer – not the marketer – is fundamentally in charge, in control, and dictates the terms of the consumer – marketer relationship. We go above and beyond to ensure that consumers are protected at all times. 2. The Honesty ROI: Honesty of Relationship, Opinion, and Identity Honesty of Relationship We practice openness about the relationship between consumers, advocates, and marketers. We encourage WOM advocates to disclose their relationship with marketers in their communications with other consumers. We don’t tell them specifically what to say, but we do instruct them to be open and honest about any relationship with a marketer and about any products or incentives that they may have received. We stand against shill and undercover marketing, whereby people are paid to make recommendations without disclosing their relationship with the marketer. We comply with Federal Trade Commission (FTC) regulations that state: ‘‘When there exists a connection between the endorser and the seller of the advertised product which might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience) such connection must be fully disclosed.’’ Honesty of Opinion We never tell consumers what to say. People form their own honest opinions, and they decide what to tell others. We provide information, we empower them to share, and we facilitate the process – but the fundamental communication must be based on the consumers’ personal beliefs. We comply with FTC regulations regarding testimonials and endorsements, specifically: ‘‘Endorsements must always reflect the honest opinions, findings, beliefs, or experience of the endorser. Furthermore, they may not contain any representations which would be deceptive, or could not be substantiated if made directly by the advertiser.’’
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Honesty of Identity Clear disclosure of identity is vital to establishing trust and credibility. We do not blur identification in a manner that might confuse or mislead consumers as to the true identity of the individual with whom they are communicating, or instruct or imply that others should do so. Campaign organizers should monitor and enforce disclosure of identity. Manner of disclosure can be flexible, based on the context of the communication. Explicit disclosure is not required for an obviously fictional character, but would be required for an artificial identity or corporate representative that could be mistaken for an average consumer. We comply with FTC regulations regarding identity in endorsements that state: ‘‘Advertisements presenting endorsements by what are represented, directly or by implication, to be ‘‘actual consumers’’ should utilize actual consumers, in both the audio and video or clearly and conspicuously disclose that the persons in such advertisements are not actual consumers of the advertised product.’’ Campaign organizers will disclose their involvement in a campaign when asked by consumers or the media. We will provide contact information upon request. 3. We respect the rules of the venue We respect the rights of any online or offline communications venue (such as a web site, blog, discussion forum, traditional media, live setting, etc.) to create and enforce its rules as it sees fit. We never create campaigns or encourage behavior that would violate or disrespect those rules. 4. We manage relationships with minors responsibly We believe that working with minors in word of mouth marketing programs carries important ethical obligations, responsibility, and sensitivity. We stand against the inclusion of children under the age of 13 in any word of mouth marketing program. We comply with all applicable laws dealing with minors and marketing, including Children’s Online Privacy Protection Rule (COPPA) and regulations regarding age restrictions for particular products. We ensure that all of our campaigns comply with existing mediaspecific rules regarding children, such as day-part restrictions. 5. We promote honest downstream communications Recognizing that we cannot control what real people say or how a message will be presented after multiple generations of conversation, we
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promote the Honesty ROI in downstream communications. In the context of each program, we instruct advocates about ethical communications and we never instruct or imply that they should engage in any behavior that violates the terms of this code. 6. We protect privacy and permission. We respect the privacy of consumers at all times. All word of mouth marketing programs should be structured using the highest privacy, optin, and permission standards, and we comply with all relevant regulations. Any personally identifiable information gathered from consumers through their participation in word of mouth marketing programs should be used only in the confines of that particular program, unless the consumer voluntarily gives us permission to use it for other purposes.
PRIESTS AND THE CHURCH: PROPHETS OR BUFFOONS? Patrick Primeaux In 1981, the noted psychologist Robert Coles lectured at the University of Southwestern Louisiana on Kenneth Toole’s Pulitzer Prize winning book, A Confederacy of Dunces (Coles, 1983). When asked about Dr. Coles’ interpretation of the book’s central character, Ignatius J. Reilly, as a metaphor for the Roman Catholic Church, the author’s mother responded, ‘‘He would be. Ignatius is a booby and a prophet’’ (Fletcher, 2005, p. 140). That paradoxical combination of foolishness and wisdom describes not only the Catholic Church, but also the professional role of the priest at the beginning of the second millennium. Torn between two opposing structural ideologies governing the identity of the Church and his role within it, the priest treads a fine line between buffoonery and prophecy. That paradox can be explained, in part, by his role as a public mediator. He represents God to the men and women of the world, but also the men and women of the world to God. Fundamental to the Catholic theological perspective is the firm conviction that the Gospel of Jesus Christ is addressed to all men and women, and not simply to those who formally adhere to Catholic belief and practice. From this perspective, the role of the priest is primarily symbolic. And, it is that role of representing the relationship between the divine and the human which gives rise to personal conflict, tension, and anxiety. Is the priest more a symbol of God’s interests to people? Is he more a symbol of the people’s interests to God?
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From his theological education, the priest learns a basic distinction within theological method. Theologizing ‘‘from on high’’ the focus is directed toward abstract and theoretical images of God resulting from centuries of theological and philosophical investigation. Accompanying this more traditional ‘‘top down’’ theology is a realization that these anthropological and moral determinants are defined by the institutional Church which has the responsibility and the authority to preserve, defend, and promote them. In other words, it is the role of the priest to represent the interests of God, as understood by the Church, to men and women. Theologizing ‘‘from below,’’ however, the priest focuses on the living faith of the people. Informed by sociological, psychological, and economic insights and conclusions, this ‘‘bottom up’’ theology fosters a relationship with God within the context of peoples’ lives. The role of the priest is, then, to align himself with the people in their individual and common search for a meaningful life with God. The priest, then, is caught between two fundamentally opposed ideologies, and also between two opposing theological emphases which have come into play since Vatican Council II during the second half of the twentieth century. A few years before A Confederacy of Dunces, the prominent theologian Avery Dulles published a book, which inadvertently provided intellectual credence to Mrs. Toole’s intuitive remarks. Dulles described the Catholic Church as an institutional complexity of five metaphorical models anchoring organizing structure, operating objectives, and dominating values. Taking his cue from the sixteenth-century theologian, Robert Bellarmine, Dulles first describes the Church as a secular political society. The one and true Church is the community of men brought together by the profession of the same Christian faith and participation in the same sacraments under the authority of legitimate pastors and especially of the one Vicar of Christ on earth, the Roman Pontiffy. The one true Church is as visible and palpable as the Kingdom of France or the Republic of Venice’’ (Dulles, 1978/2002, p. 38).
Anchored in the authority of the pope, the Church’s hierarchical, monarchical structure serves to sustain its unity and visibility. These emphases assume dominance in ‘‘The Rite of Ordination of a Priest’’ when, first, the candidate is reminded that he is entering into an established hierarchy within which he is to assume a public role. It is true that God has made his entire people a royal priesthood in Christ. But our High Priest, Jesus Christ, also chose some of his followers to carry out publicly in the Church the priestly ministry in his name on behalf of mankind. He was sent by the Father, and he in turn sent the apostles into the world; through them and their successor, the bishops,
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he continues his work as Teacher, Priest, and Shepherd. Priests are coworkers of the order of bishops. They are joined to the bishops in the priestly office and are called to serve God’s people (USCC, 1980, p. 62).
Second, he is enjoined to recognize that the ministry of priesthood is a participation or extension of the ‘‘priestly office’’ of the bishop, and only ‘‘united with the bishop and subject to him,’’ does the priest ‘‘seek to bring the faithful together into a unified family and to lead them effectively, through Christ and in the Holy Spirit, to God the Father’’ (USCC, 1980, p. 63). Third, the priest is to serve, but that service is proscribed and delineated. Assuming a public role in direct alignment with the bishop, the service of the priest is focused on contributing to the Church’s unity through preaching the Word and presiding over the Sacraments. With respect to the former, he is to direct his ‘‘energies to the duty of teaching in the name of Christ, the chief Teacher (USCC, 1980, p.62). That preaching, however, is to be assimilated and incorporated into his own life, practicing what he teaches: ‘‘Meditate on the law of God, believe what you read, teach what you believe, and put into practice what you teach’’ (USCC, 1980, p.62). Not only is he to practice what he teaches, but also to do so by presiding over the public prayer of the Church, especially as reflected in the rites accompanying the Sacraments of Eucharist (Communion), Baptism, Penance (Confession), and Anointing of the Sick. When you baptize, you will bring men and women into the people of God. In the sacrament of penance, you will forgive sins in the name of Christ and the Church. With holy oil you will relieve and console the sick. You will celebrate the liturgy, and offer thanks and praise to God throughout the day, praying not only for the people of God but for the whole world (USCC, 1980, p. 63).
Finally, in that capacity, the service of the priest is identified with respect to mediation: ‘‘Remember that you are chosen from among God’s people and appointed to act for them in relation to God’’ (USCC, 1980, p. 63). He serves a symbolic function, that of representing the interests of God to the people. Voluntarily and without constraint, the priest relinquishes any tendency toward personal entitlement and ambition to serve the interests of the Church. Literally, he becomes a living representation of the visible unity of the Church, a ‘‘company man’’ writ large, wearing a black suit and Roman collar rather than a gray flannel suit and power tie. Doing so, he promises obedience to the bishop, and willingly enters into a public role within a
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hierarchical organization anchored in obedience, and does so in service to the unity and visibility of the Church. So far, so simple. Any deviation from this formula is attributed to disobedience, and public sanctions are invoked to punish public offenders. Priests who question the authority of the pope or engage in questionable interpretation of church precepts or doctrine are silenced and removed from teaching assignments. And, those who serve the Church, promoting its unity and visibility, are rewarded with titles and promotions accompanied by distinctive titles and dress. They become bishops, archbishops, cardinals, moving up the corporate ladder into roles of increasing status and authority. This hierarchical and authoritative model of the Church is not immune to the kinds of difficulties found in other hierarchical organizations, among which is ‘‘groupthink’’ which Irving Janis has described as ‘‘a quick and easy way to refer to the mode of thinking that persons engage in when concurrence-seeking becomes so dominant in a cohesive group that it tends to override realistic appraisal of alternative courses of action’’ (Janis, 1983, p.1). The pedophilia scandal of the early part of this century exemplifies the implications of ‘‘group think’’ for a Church committed to preserve visibility and unity. Appreciating the implications of this understanding of the Church and of the role of priest within it, one can readily move into analogies with other kinds of corporate institutions with hierarchical structures both in business and politics. Actually, the Church can serve as an inspiring model for organizational stability, clarity of mission and vision, consistent alignment of personnel with objectives, deeply embedded values anchoring its structure, and ‘‘groupthink.’’ (When one of the world’s largest financial services companies was cited for fraud, among the imposed penalties was a mandated ethics program. One question posed to managers involved an observation that a fellow accountant was producing false financial statements to curry favor with supervisors. What was one to do? The test provided several alternatives: reporting the fraud to civil authorities, alerting the immediate supervisor, confronting the perpetrator. The ‘‘correct’’ answer recommended any action, which would keep the problem in-house and avoid any external notification of difficulty within the company. In the interests of visibility and unity, this company would advocate the same solutions pursued by the American bishops when confronted with clerical pedophilia – don’t let it out.) Dulles presents four other metaphorical models of the Church, which call into question and threaten to undermine this traditional hierarchical model
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with its focus on visibility and unity. Originating in the eighteenth and nineteenth centuries, these new models gradually gained both prominence and sanction: the Church as democratic community, sacrament, pilgrim people, and servant (Dulles, 1978/2002). Common to all of them is an emphasis on the people who comprise the Church, the relationships among themselves as well as with God, and their responses to the needs and concerns of the world surrounding them. Perceived as a democratic community of like-minded individuals, the Church is described as less visible and more invisible, less authoritative and more cooperative. Originating with nineteenth-century scholars centered on Germany’s Tubingen University, this understanding of Church gained popularity in the last 200 years, and became formally sanctioned when its basic tenets were incorporated by Pope Pius XII in the encyclical Mystici Corporis Christi (Pius XII, 1943). Defining the Church as ‘‘The Mystical Body of Christ’’ encouraged a relational dynamic among the people of the Church who, sharing the same faith and prayer, become, in effect, a corporate sign or symbol of God’s presence in the world (Dulles, 1978/2002 pp. 61–76). According to Dulles, that designation became even more popular when the twentieth-century theologian Henri de Lubac described the Church as a Sacrament, and influenced other theologians – notably Carl Rahner, Yves Congar, and Edward Schillebeeckx who identified the Church as ‘‘The Sacrament of the Enounter with Christ’’ (Dulles, 1978/2002, pp. 77–89). They, in turn, influenced the Second Vatican Council’s Constitution on The Church, Lumen Gentium, which defined the Church ‘‘as a sacrament or sign and instrument of intimate union with God and of the unity of all mankind’’ (Paul VI, 1964). Theologizing ‘‘from below,’’ then, the question is raised as to whether the Church is coextensive with the hierarchically structured Roman Catholic Church. It would seem that the Church is more a leaven to the world, a powerful force for building community and solidarity among all people of the world than a strange cult on the margins of society. And, accompanying this perspective is an impetus toward greater engagement with the world and the kind of self-criticism aimed toward becoming ever more effective in pursuit of bringing theory and practice together. Not only does this impetus lead to criticism of the institutional Church, but also raises questions about traditional doctrine, especially with respect to the relationship between God and humanity. At the same time, however, greater emphasis is placed on the whole of the community as Church, and on membership within an organization with tremendous power to effect change and move the world toward its objectives.
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As a Sacrament, the Church is dynamic rather than static, and Dulles describes that dynamism with respect to Vatican Council II, and its definition of the Church as ‘‘the Pilgrim People of God’’ (Dulles, 1978/2002, p. 62). This renewed emphasis on dynamic community moving ever forward, especially toward alleviating human problems, extends the democratic model and challenges hierarchy by enlisting renewal and repentance, i.e. admitting to, and overcoming human weakness. Here again ‘‘groupthink’’ rears its ugly head. Membership in the larger, universal community becomes localized and actualized in smaller communities, often of like-minded individuals, who ban together and become so centered on one another that they lose sight of the greater world and of their adherence to the greater Church. Focusing so intently on themselves, the small group becomes an end in itself, and engages the world in terms of its own myopic vision. This emphasis on engagement with the world, even with its inherent difficulties, leads Dulles to conclude that the Church is a ‘‘Servant’’ to the needs of the world (Dulles, 1978/2002, pp. 114–128). This theological category is also reflected in the documents of the Second Vatican Council, but this time in its constitution on The Church in the Modern World, Gaudium et Spes (Paul VI, 1965). Pope John XXIII adopted its theological principles in his encyclical, Pacem in Terris, and invited all people to pursue ‘‘peace in the world,’’ primarily by fostering human development as reflective of God’s presence in the world (John XXIII, 1963). The entire Church, all of its members strive for the values of peace and justice. Clearly, the Church’s vision is directed outward rather than inward, and brings the focus to bear more on societal needs and concerns than on matters of institutional regulation and compliance. ‘‘The Rite of Ordination of the Priest’’ alludes to that theological expression of the identity and mission of the Church, but only parenthetically. Earlier, we glossed over phrases reflective of this emphasis as does the Rite itself. Through baptism the priest will initiate men and women into ‘‘the people of God’’ (USCC, 1980, p. 63). Celebrating the Eucharist, he will ‘‘pray for the people of God’’ (USCC, 1980, p. 63). The use of the word ‘‘for’’ rather than ‘‘with’’ is significant, especially as it distances the priest from the people rather than as one among them. Earlier, we read that ‘‘It is true that God has made his entire people a royal priesthood in Christ,’’ a biblical image of the people of God (USCC, 1980, p. 62). Immediately following that phrase is another: ‘‘But our High Priest, Jesus Christ, also chose some of his followers to carry out publicly in the Church the priestly ministry in his name on behalf of mankind’’ (USCC,
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1980 p. 62). Clearly, the emphasis, linguistically and theologically, belongs to the latter rather than the former, and with it, a subtle injunction to bring one’s focus to bear on the Church’s visibility and unity. This second set of Dulles’ models of the Church challenges the visibility and unity of the Church as a political model. It suggests that the Church is not exclusively hierarchical and authoritative. It is also democratic and relational, and its unity is circumscribed as much by an invisible cooperation among its members as by a visible conformity to its leadership. Do we identify the Church primarily in terms of its hierarchical leadership or primarily in terms of its participative membership? For the Protestant theologian Herbert Richardson, the question is whether ‘‘Peter is Father of the Church, or is Mary its Mother?’’ (Richardson, 1966, p. 60). That is, he takes up Dulles’ models, but frames them within a more biblical and personal manner. The first of Dulles’ models, Richardson describes with respect to the biblical image of Peter and its representation of Petrine authority. Primarily ‘‘juristic,’’ Petrine authority rests ‘‘upon a visible commission which has juridical and monarchical character’’ (Richardson, 1966, p. 60). The second set of Dulles’ models is described by Richardson with respect to the biblical image of Mary representing Marian authority. Primarily ‘‘pedagogical,’’ Marian authority ‘‘rests in cooperating ‘with a maternal love’ in ‘the birth and education of the faithful’ ’’ (Richardson, 1996, p. 60). That is, Marian unity assumes ‘‘an invisible, mystical communion originating in a divine maternity rather than a visible, hierarchical ordering originating in a divine commission’’ and, accordingly, the Church ‘‘expresses its authority through love and service’’ (Richardson, 1996, p. 60). To that end, the Church is more appropriately organized as a family rather than a hierarchy. Now, the big question becomes one of setting an agenda. Does the Church set the agenda for the world, or does the world set the agenda for the Church? Underlying the model of the Church which Dulles describes in terms of visibility and unity, is the assumption that the Church represents God to the world, mandated to set the agenda for the world and its people, calling the world to task for its failure to meet God’s will. Even though controversial, that was the agenda pursued by John Paul II. Relentlessly, he preached the evils of Communism and the failures of Capitalism to promote what he perceived to be divinely revealed principles and ideals for human solidarity. Peter Boyer recently described John Paul II’s agenda as ‘‘a bold proposal for the worldythat there is one abiding Truth, and in it resides the most promising hope for humankind’’ (Boyer, 2005, p. 54). His successor Benedict XVI continues to promote that agenda, focusing on the evils of
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rampant individualism and relativism. In his homily at the Mass immediately before the conclave that was to elect him pope, then Cardinal Joseph Ratzinger warned the cardinals that ‘‘we are moving toward a dictatorship of relativism which does not recognize anything as for certain and which,’’ he added, ‘‘has as its highest goal one’s own ego and one’s own desires’’ (Boyer, 2005, p. 56). For Peter Boyer, this quote reflects the new pope’s determination to follow in the footsteps of his predecessor, preaching that ‘‘the Church must stand against modernity, to resist what he called ‘the waves of today’s fashions or the latest novelties’’’ (Boyer, 2005, p. 56). Clearly, both twentyfirst century popes are asserting an unequivocal stance, positioning the Church in opposition to the world and setting the agenda for the world. Boyer explains that both popes had participated in Vatican Council II, and were listed among the Council’s progressives. However, he also explains that the progressives split into two separate camps. The first ‘‘was known as aggiornamento (‘updating’), which imagined a new Church open to modernity’’ (Boyer, 2005, p. 57). The second ‘‘called for a ressourcement, or refreshing of the faith by reexploring its sources – Scripture and the early Church fathers.’’ Among this group was the young Joseph Ratzinger who ‘‘came to see aggiornamento as an accommodation to the modern world, which would weaken the faith without improving the world’’ (Boyer, 2005, p. 57). However, the models described by Dulles with respect to democratic and relational concerns suggest that the Church responds to an agenda set by the world. That is the agenda set by Liberation Theology with its emphasis on alleviating economic poverty and political oppression. Liberation theologians are advocating nothing short of a social revolution, and citing the teachings of Jesus and his fundamental option for the poor as biblical warrant. Taken to the extreme, as Jesus favors the poor and oppressed, he also condemns the rich and the powerful. Taken to the extreme, Liberation Theology also questions the institutional structure of the Church and its leadership as implicitly oppressive. This tension between models of the Church has been resolved theoretically and theologically. In the middle of the last century, writing Mystici Corporis Christi and his other influential encyclical Humani Generis, Pius XII claimed that ‘‘The Mystical Body of Christ and the Roman Catholic Church are one and the same thing’’ (Pius XII, 1950). The two are to coexist simultaneously and consistently, one contributing to the other. However, on a more practical level, the tension has far-reaching and deepening implications for the role of the priest, as a public agent of the Church. This is
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especially true of the priest as pastor of a parish or teacher in the classroom. He is enjoined to function as a public figure, to preach and uphold Church doctrine and morality in direct alignment with the pope and bishops. On the other hand, he is expected to respond to people’s needs and concerns from a more pedagogical and less authoritative frame of reference. This tension became especially apparent in the 2004 campaign for the presidency in America. Bishops and archbishops focused on the abortion issue, issuing statements barring from communion politicians advocating abortion to any degree. In many cases, priests found themselves responding to social issues like the growing disparity between rich and poor, questioning tax breaks for the wealthy, and dismantling social agencies meeting the needs of the poor. They asked why politicians advocating oppression of the poor were not barred from communion. Boyer describes this difference with respect to a recent shift among the American bishops. Earlier the bishops had espoused the late Cardinal Joseph Bernardin’s ‘‘consistent ethic of life’’ laying equal emphasis on ‘‘the entire spectrum of life from womb to tomb,’’ including capital punishment, violence and war, and care for the chronically and terminally ill alongside reproductive issues (Boyer, 2005, p. 63). In Bernardin’s own words: If one contendsythat the right of every fetus to be born should be protected by civil law and supported by civil consensus, then our moral, political, and economic responsibilities do not stop at the moment of birth. Those who defend the right to life of the weakest among us must be equally visible in support of the quality of life of the powerless among us: the old and the young, the hungry and the homeless, the undocumented immigrant and the unemployed worker (Boyer, 2005, p. 63).
Cardinal Bernardin continues, and recommends that the Church and its leaders become engaged in the world, specifically in its political and economic institutions. Moreover, he suggests that the Church’s approach to these life issues assume the form of Marian authority with its relational compassion rather than that of Petrine authority with its juridical legalism. Consistency means we cannot have it both ways. We cannot urge a compassionate society and vigorous public policy to protect the rights of the unborn and then argue that compassion and significant public programs on behalf of the needy undermine the moral fibre of the society or are beyond the proper scope of governmental responsibility (Boyer, 2005, p. 64).
As Boyer explains, this kind of thinking was resoundingly condemned by John Paul II. It opened the door for Catholic politicians to pick and choose to focus on one point or another along the entire continuum of social concerns, also to relegate others to the periphery or seek compromising
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accommodation. Asserting Petrine authority in the service of visibility and unity, John Paul II rejected any tendency toward accommodation, and trumped any tendency toward relational, compassionate Marian authority. Boyer also refers to an Op-Ed piece in the New York Times which appeared shortly after John Paul II’s death. Thomas Cahill claimed that ‘‘in order to have been named a bishop, a priest must have been seen to be absolutely opposed to masturbation, premarital sex, birth control (including condoms used to prevent the spread of AIDs), abortion, divorce, homosexual relations, married priests, female priests and any hint of Marxism’’ (Cahill, 2005). As a result, claims Cahill (2005), ‘‘the ranks of the episcopate are filled with mindless sycophants and intellectual incompetents.’’ Since the time of Cardinal Bernardin’s death, the bishops appointed by John Paul II clearly represented and promulgated the pope’s agenda, and did so without compromise or accommodation. Cahill claims that the diminishing numbers of Catholics attending Mass is a direct result of John Paul II’s uncompromising agenda, and that he ‘‘may, in time to come, be credited with destroying his Church’’ (Cahill, 2005). Boyer also refers to opinion polls taken between the time of John Paul II’s death and Benedict XVI’s election which ‘‘show that most American Catholics favored the use of contraceptives, opening the priesthood to married men (and, in lesser numbers to women), and allowing divorced people to remarry without obtaining an annulment (Boyer, 2005). The end result, claims Boyer, is a much smaller Church of unquestioningly loyal adherents. And, that, he explains, is fine with Benedict XVI (Boyer, 2005, p. 59). The priest, then, is caught within a tension and conflict between two opposing ideologies, models of Church, and expectations attendant on each. Underlying both are opposing world views with implications more farreaching than those of the Church. That opposition can be described in terms of the ambiguity of democracy and the certitude of monarchy. Boyer explains that young men preparing for priesthood at the beginning of the second millennium have opted for the latter. Known as ‘‘Generation J.P. II,’’ they ‘‘want the real thing, they want the truthy. They want things that are authentic, they want things that will challenge them beyond themselves,’’ claims Father Bernard Murphy as quoted by Boyer (2005, p. 60). He also quotes the Archbishop of Denver, Charles Chaput, convinced that ‘‘the lack of orthodoxy has already proven that it’s empty,’’ and now has a ‘‘huge’’ growth market attractive to young people (Boyer, 2005, p. 60). More personal and reflective, and remembering my own theological and spiritual formation, the emphasis was directed toward ministry, and toward meeting the needs of people struggling to identify themselves as believing
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Christians in a world so opposed to the ideals inherent in Catholic belief and practice. The more we became engaged with others, the more difficult it became to focus on ourselves and our own self-fulfillment and self-satisfaction, even in prayer and a relationship with God. Actually, the more difficult it became to immerse ourselves in, and pursue, the discipline and romance of the priesthood that had been modeled for us by an earlier generation. The romance of being set apart from the world, of meeting the world and its people in formal settings, preaching to them, celebrating the Eucharist for them quickly disappeared, as did the accompanying implicit paternalism. Rather than remote and distant, we were to become directly engaged in their spiritual and economic hunger, and, with them, striving for peace and justice in the world. We would even dress like them, drive the same kinds of cars they did, attend the same movies they attended, rally against racial segregation and the Vietnam Was as they did. And, also with them, question authority, whether political or ecclesiastical. To that end, the discipline of set times and places for private meditation and public prayer, of remaining home in the evening to pray and read, of refraining from social interaction with family and friends would lose both theoretical and practical significance. The institutional structure of the Church, the authority of its leaders, its proscribed ritual, and its orthodox pronouncements would also become matters of debate. The emerging interest in the priesthood, which Boyer describes, seems to be driven by a restoration of the romance and disciple eschewed by the present generation of priests. He describes the Franciscan Friars of the Renewal founded by Father Benedict Groeschel in the South Bronx who, in the words of their founder, ‘‘are looking for more authentic – if you like, a more literal – observance, of their faith and gospel values’’ (Boyer, 2005, p. 60). Described by Boyer as ‘‘orthodoxy unplugged,’’ these young Franciscans: wear long beards and gray medieval habitsylive primarily in a converted conventysleep on blankets spread over the bare floors of their tiny cells, and do all the cooking and cleaning for themselves, and for the homeless men who live in the shelter on the bottom floor of the friary (Boyer, 2005, p. 60).
Boyer also notes that ‘‘many come to an order after a radical conversion experience,’’ and question the motivation driving ‘‘the new movements – evangelical and orthodox, like the Pope himselfy’’ (Boyer, 2005, p. 60). Dare we ask the sensitive question as to whether these people are seeking priesthood and religious life primarily for themselves – as extensions of their own conversion experiences – or primarily to minister to others? They,
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however, could easily and appropriately ask the same question of those who have abandoned that kind of life to become more actively engaged with people. The question for the priest is not simply that of defining himself and his role within the Church, but of determining which Church to represent visibly and invisibly. Whether choosing to theologize ‘‘from above,’’ aligning himself with the moral certitude of Petrine authority, or to theologize ‘‘from below,’’ with the moral ambiguity inherent to Marian authority, the need for accommodation does not disappear. The priest, not unlike everyone else, finds himself juggling between expectations – family vs. work, self-satisfaction vs. the needs of others, money for food vs. money for play – and finds the need for making decisions which impose limitations and boundaries, and necessitates accommodation.
REFERENCES Boyer, P. (2005). A hard faith. New Yorker (May 16), 54–65. Cahill, T. (2005). The price of infallibility, New York Times, April 5. http://www.votfbpt.org/ The_Price_of_Infallibility.pdf Coles, R. (1983). Gravity and grace in the novel a confederacy of dunces. Lafayette, LA: University of Louisiana at Lafayette. Dulles, A. (1978/2002). Models of the Church. New York: Doubleday. Fletcher, J. (2005). Ken and Thelma: The story of a confederacy of dunces. Gretna, LA: Pelican Publishing Company. Janis, I. (1983). Groupthink. Boston: Houghton Mifflin. John XXIII (1963). Pacem In Terris. http://www.vatican.va/holy_father/john_xxiii/encyclicals/ documents/hf_j-xxiii_enc_11041963_pacem_en.html Paul VI (1964). Lumen gentium: Dogmatic constitution on the Church. http://www.vatican.va/ archive/hist_councils/ii_vatican_council/documents/vat-ii_const_19641121_lumengentium_en.html Paul VI (1965). Gaudium et Spes: Pastoral constitution on the Church in the modern world. http://www.vatican.va/archive/hist_councils/ii_vatican_council/documents/vat-iicons_ 19651207_gaudium-et-spes_en.html Pius XII (1943). Mystici corporis Christi. http://www.vatican.va/holy_father/pius_xii/encyclicals/ documents/hf_p-xii_enc_29061943_mystici-corporis-christi_en.html Pius XII (1950). Humani generis. http://www.vatican.va/holy_father/pius_xii/encyclicals/documents/ hf_p-xii_enc_12081950_humani-generis_en.html Richardson, H. (1966). Mother of the Church, Theology Digest, 14(1), 60. See also Mother of the Church, The Current. 5(1965), 48–61. USCC (1980). Ordination of a priest. New York: Pueblo. http://www.carr.org/meripper/faith/ o-priest.htm
HOW IS ‘‘BUSINESS ETHICS’’ POSSIBLE? James E. Roper ABSTRACT Beginning with a characterization of ethics as what should be done ‘‘all things considered,’’ I reject the traditional ‘‘moral manager’’ model of business ethics and conventional stakeholder analysis as ways of dealing with ethical issues in the context of large corporations, to which any viable approach to business ethics must apply. In light of my rejection of traditional approaches to the subject, business ethics stands in need of a new agenda. I suggest that what I call the ‘‘moral corporation’’ model provides a suitable framework, and I outline several issues that might characterize such an approach. Finally, I consider a challenge to my proposed reorientation of business ethics and conclude that it does not provide a reasonable alternative.
PART 1: PROBLEMS WITH TRADITIONAL APPROACHES TO BUSINESS ETHICS By ‘ethics’ I mean the discipline that helps determine what ‘‘all things considered’’ a person ought to do in a given situation. There are various other normative disciplines that deal with hypothetical contexts – contexts in Crisis and Opportunity in the Professions Research in Ethical Issues in Organizations, Volume 6, 181–191 Copyright r 2005 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 1529-2096/doi:10.1016/S1529-2096(05)06010-4
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which the question is: What should someone do, if he or she wants to achieve some particular end? For example, etiquette tells us what we should do if we want to behave with good manners. The law tells us what to do if we want to behave legally. The rules of various games tell us how to order our actions if we want to play these games. Ethics is not, on my view, a matter of what we should do hypothetically – that is, assuming we want to achieve certain ends. Ethics tells us what we should do ‘‘all things considered’’ or ‘‘no holds barred’’ (Benjamin & Curtis, 1981, pp. 9–10). When we debate an ethical issue, whatever can be shown to be relevant can be brought to bear on the decision we make; and establishing relevance is not limited to some hypothetical standard such as the law or the rules of a game. The term ‘business ethics’ has a very broad application – applying to businesses of various sizes, from the very small to the very large. For purposes of this paper, though, I focus on how the term ‘business ethics’ applies or does not apply to major corporations – for example, the Fortune 500 companies. These giant businesses account for such a large percentage of our employment and gross domestic product that no approach to business ethics that does not show how this term can apply to such entities can possibly be satisfactory (U.S. Census Bureau: Statistics of U.S. Businesses: 2003, http://www.census.gov/csd/susb/susb.htm). These huge corporations are ‘‘directed organizations’’ in the sense that they are focused exclusively on maximizing their profits and on such related matters as increasing market share (see Ladd, 1970). That is, these companies are focused on goals that are hypothetically mediated. What should they do if they want to maximize their profits? What actions will be most helpful if they want to increase their market share? And so on. This entails that these ‘‘social inventions’’ are not moral persons in any appropriate sense – that is, they are not members of the ‘‘moral community’’ (See Coleman, 1982). This follows from the fact that they are incapable of making decisions about what they should do ‘‘all things considered.’’ Only certain specific things are relevant to the decisions these directed organizations make; and the goals toward which these corporate entities are directed – for example, maximizing profits and related matters – determine these judgments. It is a consequence of this reasoning that the so-called ‘‘stakeholder theory,’’ interpreted as the view that all or most of the various groups affected by a major corporation – employees, community, customers, wholesalers, shareholders, and so on – is not relevant to the goals toward which the modern large corporation is ‘‘directed’’ (Kelly, 2003, p. 150). These corporations exist to earn profits for their shareholders; other putative ‘‘stakeholders’’ are taken into account only insofar as doing so contributes to
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maximizing profits for the corporation and its shareholders. It might plausibly be argued that this situation is not a happy one, or even that it is somehow immoral; but the bottom line is that such a move must entail questioning the structure of the modern corporation. As currently constituted, large corporations are not amenable to ‘‘stakeholder’’ analysis (Kelly, 2003, p. 150). My analysis entails that large corporations are not moral persons; they are not the sorts of entities that can be judged to be moral or immoral. A common answer to this line of reasoning is to claim that corporations do not ‘‘act’’; rather, their human ‘‘agents’’ act and these human beings are members of the moral community. As appealing as this move is, it runs afoul of (1) a matter of logic and (2) certain facts about the world of business as currently constituted. For simplicity, I restrict my remarks to publicly held corporations. I will also remark briefly regarding closely held companies, which are vulnerable to many of these same arguments. First, I turn to the logical issue raised by the claim that the ‘‘actions’’ of a corporation are reducible to the actions of those individuals who are the employees of the company. The fallacy of composition is defined as arguing that, because every part of a thing has a certain property, the thing itself has that property. For example, because every part of my watch weighs less than some very small amount, call it x, my watch itself weighs less than x. Thus stated, the fallacy is apparent. It is true that there are instances where the fact that the ‘‘parts’’ of a thing have a property do entail that the thing itself has that property. For example, the fact that every subregion of a ‘‘circle of color’’ is red does entail that the whole circle is red. But notice that cases like this have a special property. There is always a premise that connects certain properties of the parts to properties of the whole. In this case, the general assumption that the circle is homogeneous in color, as seen by the naked eye, allows us to move from information about the color of all subregions to a conclusion about the whole circle. How does this analysis apply to major corporations? Those who argue that the ‘‘actions’’ of a corporation are reducible to the acts of those who are employed by the corporation want to conclude that, if we can make the employees of a corporation moral, we can make the corporation itself moral. This is an example of the fallacy of composition. To avoid such a result, one would need to point out the sort of ‘‘connecting premise’’ I alluded to in the above example of the circle of color. Such a premise would have to demonstrate a link between the acts of a company’s employees and the acts of the corporation itself – placing the burden of proof on those who would make this argument. Indeed, the general diffusion of
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responsibility that is fostered by current corporate law makes it extremely unlikely that such a link can be found. Rather, it will be a major aspect of my proposal regarding the future of ‘‘business ethics’’ that, through changes in corporate law, such a link must be enabled. Therefore, in today’s corporate environment, those who attempt to answer my charge that the modern corporation is incapable of ethical ‘‘actions’’ by reducing the deeds of corporations to those of their employees are making an argument that exhibits the fallacy of composition. It is important to stress that I am not arguing that the employees are usually unethical individuals. ‘‘Mob mentality’’ probably plays a major role in leading people whose actions are by and large ethical to ignore such ethical considerations in the context of corporate ‘‘group think’’; but my point here is different. It is the more sweeping logical point that, even if every employee in a firm acts ethically, the company itself may behave quite unethically. Again, this pertains to the nature of the modern corporation as a directed organization whose focus is the bottom line and related issues. Even if one rejects this logical argument against the reduction of a corporation’s ‘‘acts’’ to the actions of its employees, one still must contend with my second argument. If a manager attempts to make a decision judged ethical in the sense that it is the best thing to do ‘‘all things considered’’ – even though this decision will cost the company money – that individual will face several problems. First, shareholders who find out about this decision will probably sue the corporation to prevent money from being ‘‘wasted’’ on the manager’s ethical ideals – even if the manager happens to be the CEO. Second, corporate raiders will likely ‘‘smell blood in the water’’ because the company is squandering money it does not have to spend to achieve its bottom-line objectives. Those who take the company over will not continue the ethical activities of the well-meaning manager. Third, the company will face ‘‘market discipline’’ as it tries to compete with companies that are not ‘‘doing the right thing’’ even though it costs money. Note, incidentally, that the third, and perhaps the most significant, of these problems will also confront the owner or owners of a ‘‘closely held’’ company. While such an entity may be able to avoid hostile takeovers, it will face questions of market discipline in our increasingly globalized economy. Such a company may also face legal and other challenges from individuals with a stake in the company. Most orthodox business ethicists attempt to counter my arguments in the preceding paragraph as follows: ‘‘Being ethical actually saves money – or is, at least, revenue neutral – in the long run.’’ The problem with this retort is that the markets – the stock market as well as the global business
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market – are not concerned with ‘‘the long run.’’ Although there have been many criticisms of the limited perspectives of even our largest companies, there is absolutely no evidence that companies have adjusted their view to a perspective long enough to vindicate the sort of ‘‘all things considered’’ actions that ethics mandates. Even if one could show there have been some changes in large corporations’ willingness to look further out, the mandate that an ethical decision requires we look at all things that can be proved relevant means that we could potentially have to go many years into the future to vindicate a decision – far beyond the monetary horizon of even the most public spirited publicly traded corporation. Indeed, the stock and bond markets’ gyrations provide a bold exclamation point to my contention. The move to the long run just does not work. Ethical behavior does cost money. And large corporations are not currently structured to take the long-run ramifications of ‘‘ethical actions’’ into account. Because of the importance of ‘‘the long-run perspective’’ as a means of showing that ethics is actually cost-effective, I also cite some purely economic considerations that show the futility of this popular approach. Most economic texts make it clear that the long run is, as a rule of thumb, about 7 years – in economic, not ethical, terms. Businesses generally will not make investments in, for example, new equipment that will not pay for itself in about 7 years – even if it can be shown that, going beyond that typical time horizon reveals the investment to be profitable for the company. The argument that ethics pays for itself in the long run clearly breaks down if businesses will not even make investments that will increase their bottom lines in the long run. Moreover, this argument turns on what is known by the company itself, which we can assume has very complete information; but publicly traded corporations depend on shareholders to support their economic ventures and shareholders will typically have much less comprehensive information about the long-run financial implications of company investments. They will, therefore, usually not be willing to invest money in the stock of companies that make such investments; and this is borne out in the economic data. (I thank my friend David Zin, an economist, for help with this point and many other aspects of this paper.) Traditionally, business ethicists seem to have presupposed that making the employees of a firm ethical would make the firm itself ethical, in the sense that the ethical actions of the employees would somehow translate uniformly into ethical actions by the corporation itself. My arguments in the preceding paragraphs show this assumption founders on both a point of logic and the facts of our business world. It follows that this traditional approach, which is usually called the ‘‘moral manager’’ model of business
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ethics, is both logically and factually defective. So those who view the task of business ethics as ‘‘making the employees (especially the managers) of major companies go about their corporate tasks in ethical ways’’ have a problem. Doing this is not sufficient to make the companies themselves ethical.
PART 2: HOW IS BUSINESS ETHICS POSSIBLE? If the traditional moral manager model and stakeholder theory as currently conceived must be rejected as ways of making major corporations moral, what is left for business ethicists to do? In this section, I suggest a new way of framing the task of business ethics. On this view, the goal of business ethics is to make large corporations more ‘‘ethics friendly’’ environments. I will not attempt the Herculean task of presenting a detailed strategy for accomplishing this objective. That is the mission I propose for our community. I will, however, specify a few areas where this new mandate might begin its task of reinventing business ethics. There may be many different ways to proceed with the new direction I recommend. My remarks here are only intended to help focus our discussion. Interestingly enough, this approach may retain aspects of both the moral manager model and stakeholder theory, but not in their traditional forms. The dream, or delusion, that looking at ‘‘the long run’’ somehow bridges the gap between doing what is ethical in the sense that it is what ought to be done ‘‘all things considered’’ and doing what the logic of a capitalistic market requires to maximize the bottom line, for the company, its shareholders, and employees who promote profit maximization, fails for both logical and factual reasons – as we have seen. The central task of business ethics clearly requires resolving the tension between acting ethically and following market logic in a given situation. To accomplish this, in an economic system dominated by very large corporations, several things must be done to render these corporate environments more amenable to ethical decisions on the part of employees – both individually and in groups. As things stand, acting ethically – really acting ethically, even though this will cost the company money in the short and the long run – will usually result not only in losing ones job but in ruining ones career. Ethics, we argued at the beginning of this paper, is concerned with what, ‘‘all things considered,’’ a person ought to do in a given situation. There is more to the subject of ethics than this, however. If an individual ought to do something ‘‘all things considered,’’ that person will be judged ‘‘responsible
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for’’ carrying out the specified action. But responsibility usually requires both knowledge and ability (Velasquez, 2002, pp. 46–51). To say that someone is responsible for doing something he or she could not have done under any reasonable circumstances is bizarre; as is the claim that a person is responsible for actions he or she did not have the knowledge and expertise to carry out. Among the ‘‘all things’’ to be ‘‘considered,’’ therefore, in determining the ethical thing to do, are the knowledge and ability of those responsible for the matter in question. Corporations, by their very nature, are designed to diffuse responsibility. They shield the shareholders from responsibility. That is one, if not the most important, aspect of the modern corporation. But corporate structure typically shields employees as well. If something very bad is done, some employees may be held legally responsible; but this usually requires that actual criminal charges be brought against specific people. To make the modern corporation more ‘‘ethics friendly’’ appears to require changes in the legal structure of the modern corporation for the purpose of requiring employees to be responsible, both legally and ethically, for their decisions. Spelling out exactly how this can be done is beyond the scope of this paper. As I said, my goal here is not to present a detailed agenda for making business ethics relevant to the economic and political realities of our world; rather, I present some suggestions about how to begin such a task. Charging employees with ethical responsibility for their actions may be the most important step toward advancing that agenda. As I argued above, the claim that the employees of a corporation act – not the corporation itself – is not credible in light of the fact that U.S. law regards corporations as ‘‘legal persons’’ (Hartmann, 2002). To make it possible for corporate employees to be truly responsible, legally and ethically, for their acts, the legal status of the modern corporation as a ‘‘legal person’’ must be reconsidered. The current situation makes the assignment of responsibility for unethical and illegal actions in a corporate setting moot, to say the least. Given that the courts cannot put a ‘‘naughty’’ corporation in jail, they are left with the recourse of assessing a fine. But such fines are usually small enough to be absorbed by the corporation as operating costs. If the fine is really large, however, large enough to drive the corporation out of business, we are still left with the problem of the people who were involved in the activities. Other corporations will typically hire them, and they can continue to do the things that led to their former corporate homes going bankrupt. The decision to grant legal personhood to corporations was, in fact, not made by the U.S. Supreme Court; it was made by a Supreme Court clerk who misrepresented a Supreme Court decision in the ‘‘head note’’ he wrote
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to a case (Hartmann, 2002, pp. 107ff.). Although more than a hundred years of American jurisprudence have enshrined that ‘‘decision’’ in our law, it should not be treated as sacrosanct. To do so means that business ethicists are willing to yield to business lawyers on this most important issue. I, for one, will not acquiesce on this critical point. And I call on my colleagues to join me in this stance. If corporations are denied the status of legal persons, a number of other issues can be raised. First, do corporations have the individual rights our legal system has granted them? If they should be denied legal personhood, I would argue they ought not have such rights. This has profound implications for how we finance our elections and determine our legislative agenda in the United States. Second, are corporations really the ‘‘property’’ of their shareholders? When our government permitted the formation of corporations, the expectation was that this would benefit the state and nation as a whole. Instead, this original social purpose has been submerged in the claim that the shareholders ‘‘own’’ the corporation and are uniquely qualified to benefit from its largesse, while avoiding the implications of its failures. Corporations have, collectively, taken on a life of their own – a life that threatens the United States and its democratic political system that has been a model for the world (Korten, 2001). Finally, should shareholders be the only real stakeholders of the modern corporation? If corporations are denied legal personhood, and the concomitant notion that they are the legal property of their shareholders, the claims of other ‘‘stakeholders’’ – especially employees – make much more sense. In particular, the denial of most employee rights and the rejection of most democratic processes in the workplace are called into question. There are many strategies we might pursue to make the modern corporate ‘‘environment’’ more amenable to ethical action, as specified earlier in this paper. I have suggested some areas to be examined; but, as I have said, laying out a specific agenda is not my goal. My objective in this paper is to show that traditional models of business ethics are inadequate and to propose a new approach to the subject: making corporations the sorts of venues that permit and encourage truly ethical behavior. This will be a departure from the current situation as I have explained and critiqued it in the first section of this paper.
PART 3: CHALLENGE AND CONCLUSION The proposal I make in this paper, together with my suggestions for implementation are novel; but others have challenged the traditional
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approaches embodied in ‘‘the moral manager’’ model and ‘‘stakeholder theory.’’ For example, Boatright rejects these conventional approaches and suggests we substitute what he calls ‘‘the moral market’’ model for ‘‘the moral manager’’ model (all references to Boatright, 1999). There are certainly many other challenges I expect from those committed to the more standard approaches I reject in their usual forms; but Boatright’s proposal is important both because of his prominence in the field and because, while apparently agreeing with me that traditional approaches are inadequate as they stand, he proposes an alternative that appears quite different from my ‘‘moral corporation’’ proposal. Boatright argues that we need to work toward making the ‘‘market moral.’’ He is vague about how this should take place, but he seems to believe that we can use ‘‘contracts’’ to more fully specify corporate ‘‘roles’’ in ways that will facilitate ethical actions by both employees and corporations. It is not clear whether Boatright intends to inject morals into the market through government regulation or through self-regulation because he seems to believe that business ethics must focus primarily on small businesses – ultimately on families. My approach, of course, insists that any satisfactory agenda for our subject must deal with major corporations, and this makes direct comparison with Boatright difficult. Boatright’s emphasis on contracts seems to conflict with my characterization of ethics as concerned with what a person ought to do ‘‘all things considered.’’ First, contracts in a business setting seldom involve individuals by name, so the issue of what a particular person should do in a specified situation will usually fall through the conceptual cracks. Second, contracts are not open to the kinds of new considerations that the ‘‘all things considered’’ mandate invites. Typically, business contracts, even those involving specified corporate roles, are limited in scope. This entails that Boatright’s model will not capture business ‘‘ethics’’ as many philosophers, and I, understand the term. Both Boatright and I are making recommendations about the future of business ethics. Neither of us lays out all the details of the program we are proposing. Both proposals raise deep issues. In my case, these issues pertain to how we can, essentially, redesign the modern business corporation. This is certainly no easy task, especially in light of the many powerful interests that will oppose such redesign. But the problems the ‘‘moral corporation’’ approach faces are matters of the distribution and use of political and economic power. Boatright’s suggestion that we make the ‘‘market moral’’ seems to raise more serious issues. In a sense, his proposal appears analogous to making the Serengeti moral. The market is not just the stock
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market. It is not just the national market in the U.S. Ultimately, it is the global market and I am skeptical that there is any way to render this market moral through contractual arrangements and regulatory oversight – as Boatright’s model seems to propose. If we can make corporations more amenable to ethics, however, the market may become a more ethical venue as a side effect. In addition, while making managers (employees) moral is not sufficient to make corporations moral, it may be a necessary condition. This would vindicate a somewhat truncated version of the moral manager approach. If corporations can be made ‘‘ethics friendly’’ environments, then moral managers will be essential to realizing the promise such venues imply. Finally, the sorts of changes I suggest are needed to make corporations hospitable to our moral aspirations also open the door to real stakeholder analysis. If corporations are not the sole provinces of shareholders, introducing the needs and desires of different stakeholders, especially employees, into the mix makes much better sense (Kelly, 2003, pp. 150ff.). In summary, I began by defining ‘ethics’ as the discipline that asks the question: ‘‘What should be done in a given situation ‘all things considered’ or ‘no holds barred’?’’ Moving to a consideration of ‘‘business ethics,’’ I argued that the conventional approaches to this subject, the ‘‘moral manager’’ model and traditional ‘‘stakeholder’’ view break down when applied to the ethical analysis of large corporations – a venue that is essential to any feasible business ethics agenda. I next suggested that the most fruitful approach to the subject is what I call the ‘‘moral corporation’’ model. On this view, the goal of business ethics is, in effect, to redesign the modern corporation in order to make it more amenable to the ethical actions of its employees. While I do not provide a complete agenda for fully implementing this model, I do recommend some strategies for approaching business ethics by restructuring the modern corporation. I address, in the body of the paper, challenges that would likely come from those committed to traditional approaches; but I conclude the paper by analyzing a more recent proposal for reorienting business ethics. I show this approach fails to deal with issues essential to any adequate model of business ethics.
REFERENCES Benjamin, M., & Curtis, J. (1981). Ethics in nursing. New York: Oxford University Press. Boatright, J. R. (1999). Is business ethics based on a mistake? Business Ethics Quarterly, 9(4), 583–593. Coleman, J. S. (1982). The asymmetric society. Syracuse, NY: The Syracuse University Press.
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Hartmann, T. (2002). Unequal protection: The rise of corporate dominance and the theft of human rights. USA: Rodale. Kelly, M. (2003). The divine right of capital: Dethroning the corporate aristocracy. San Francisco: Berrett-Koehler. Korten, D. C. (2001). When corporations ruled the world (2nd ed.). San Francisco: BarrettKoehler. Ladd, J. (1970). Morality and the ideal of rationality in formal organizations. The Monist, 54(4), 488–516. U.S. Census Bureau: Statistics of U.S. Businesses: 2003, URL http://www.census.gov/csd/susb/ susb.htm Velasquez, M. G. (2002). Business ethics concepts and cases (5th ed.). Upper Saddle River, NJ: Printice-Hall.
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A PHILOSOPHICAL PERSPECTIVE ON CORPORATE CODES OF ETHICS$ James E. Roper ABSTRACT Beginning with the premise that large corporations are legal entities but not members of the moral community, the paper examines how ‘‘corporate ethics codes’’ might facilitate ethical actions by employees. ‘‘Wide reflective equilibrium’’ is explored as a way of creating ‘‘corporate ethics codes.’’ I suggest how a wide reflective equilibrium mediated ethics code might be utilized to suffuse ethics throughout an organization. Before exploring how wide reflective equilibrium might facilitate the development and use of corporate ethics codes to promote ethical actions by members of a company, I consider another vision of a corporate code of ethics. Some proponents of such codes may reject my description of this alternative model as unrepresentative of their work, but I question their reasons for doing so. I call this alternative approach ‘‘The Ten Commandments’’ model, and I argue that any approach to developing a corporate code of ethics that is consistent with this model is unlikely to $
In this paper, I will be referring only to very large publicly held, for-profit, multinational corporations – not to smaller local corporations, non-profits, or closely held companies. The economic importance of these entities justifies this approach.
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promote ethics throughout an organization – and may actually have the opposite effect.
1. INTRODUCTION There are various other normative disciplines that deal with hypothetical circumstances in which the question is: What should a person do, if he or she wants to achieve a particular goal. For example, the rules of various sports tell us how to act if we want to participate in these activities. Ethics is not about what we should do if we want to achieve certain goals. Ethics prescribes what to do ‘‘all things considered.’’1 Whatever can be proved relevant should be part of the decision we make, and relevance is not circumscribed hypothetically. If this is the locus of ethics, how can a ‘‘code of ethics’’ be designed and implemented to create a culture conducive to ethical actions by corporate employees and, indeed, by the corporation itself? This problem is complicated because the large corporations I focus on in this paper have standing before the courts as legal ‘‘persons’’ but are arguably not members of the moral community. These social inventions are ‘‘directed organizations’’ which focus on improving their profits, market share, etc. – not on preserving people’s rights, promoting justice in the world, or any of the other things ordinarily associated with ethical behavior.2 Since I have written in favor of this heterodox model of the large publicly held corporation in other places – and since it has strong support from others – I will not argue this issue here; rather I take it as a starting point. 3,4 Before exploring what I take to be the most promising way of developing and using corporate ethics codes to promote ethical actions, I consider another vision of such codes. I call this alternative approach the ‘‘Ten Commandments’’ model, and I argue that any approach to developing a corporate code of ethics that accords with this model is unlikely to promote ethics throughout the organization – and may actually have the opposite effect. This is true for a number of reasons, but perhaps the most surprising and intriguing is that this approach fails to take into account the sort of ‘‘symbolic meanings’’ the late Robert Nozick came to believe were incompatible with the sort of libertarian ‘‘minimal state’’ so admired by many corporate types because it promises an economically freer and less-regulated operating environment.5 While some may reject the Ten Commandments approach as a caricature of what they do, the pervasiveness of this approach
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as a vehicle for codes of all types entails they have the burden to show that they are not employing some variation of this common strategy. After showing the Ten Commandments type of approach deficient, I turn to what is arguably the most discussed and widely utilized method of ethical justification in the literature of the last 50 years – ‘‘wide reflective equilibrium.’’ After briefly exploring the history of this approach, I explain how it works in the context of ethics in general, and ethics codes in particular. I suggest that a corporate ethics code based on this model has a better chance of ‘‘suffusing ethics throughout the organization’’ than any other of which I am aware. There is, however, a residual problem. As I said in my first paragraph, I assume corporations are not members of the moral community. They are not as organizations capable of acting morally or immorally any more than, say, my car is. It follows that the employees of such organizations are the vehicles of ethical action by large corporations. Many corporations’ ‘‘talk the talk’’ about being ethical but fail to ‘‘walk the walk’’ and properly reward employees for taking ethical stances even when doing so might cost the company money. In the final section (before my summary), I briefly discuss the problem of how large corporations – arguably the major actors of our time – can become more ‘‘ethics friendly’’ environments. Much more remains to be done here, but the approach to creating corporate ethics codes I suggest constitutes a beginning.
2. THE ‘‘TEN COMMANDMENTS’’ APPROACH TO A CORPORATE ETHICS CODE The late Isaac Asimov is justly famous for his ‘‘Three Laws of Robotics.’’ 1. A robot may not injure a human being or, through inaction, allow a human being to come to harm. 2. A robot must obey orders given to it by human beings except where such orders would conflict with the First Law. 3. A robot must protect its own existence as long as such protection does not conflict with the First or Second Law.6 Asimov’s stories and books about robots assume that the ‘‘positronic brains’’ of these creatures are imbued with these three laws. His three laws are so vague and ambiguous, however, that they resolve few actual dilemmas in which a robot might find itself. Indeed, all of Asimov’s writings about robots revolve around dilemmas created by the fuzzy character of the
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three rules. The point is that ‘‘simple’’ rules like the three laws are inherently vague and ambiguous. To be at all useful these laws require a great deal of illustrative material, as well as a thorough explanation of the social context in which they are intended to function. Although many who consider it their jobs to help companies construct and implement codes of business ethics do much more than simply make lists of rules, these rules are often the primary focus of such codes. To the extent this is true, I refer to such codes as Ten Commandments type codes. The important thing is not whether the code comes with instructions for how to communicate it to employees, video ‘‘modules’’ illustrating the code in simple cases, or with other sorts of training and development aids. If the ‘‘code’’ is essentially a set of rules or principles, whether explicitly presented in this way or not, the code will qualify as a Ten Commandments type of business ethics code. The proponents of such codes will probably resist this Ten Commandments label vehemently. They may view it as incredibly arrogant to liken the code they have helped fashion to what many believe is a divinely inspired document or, alternatively, they may believe the term Ten Commandments carries some sort of pejorative connotation. It is important, therefore, to stress that the problems with codes of this type do not derive from either of these concerns; but rather from the fact that such codes lack features essential to any proper code of ethics. Before I explain this, though, I want to focus on some aspects of such corporate ethics codes – characteristics that are often viewed as strengths. Like Asimov’s laws of robotics, Ten Commandments type codes constitute a set of rules that are to be internalized by the company’s employees. Sometimes there will be slightly different sets of rules for different sorts of employees, but the basic idea remains the same. Such codes tend to reduce morality to a checklist to determine whether or not the employee is compliant with the code. Such arrangements paint business ethics, in the context of a specified company, in more or less black and white terms. Ten Commandments type codes appear simple, transparent, and easy to enforce. You are either ‘‘compliant with the company’s code of ethics or not compliant with it.’’ The rich and complex texture of real world moral problems is simply filtered out of this picture. This is appealing to attorneys because it is consistent with the sort of moral minimalism characteristic of the law itself. The law endeavors to ‘‘reflect’’ society’s mores but it does not try fully to incorporate these mores – which are sometimes tied to religious and philosophical beliefs. In effect, Ten Commandments type codes project the profit-driven focus of the corporation itself onto each employee. Those who abide by such
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codes transform themselves into miniature versions of the company itself. This may be a great business plan in the sense that a corporation employing such a code can assume that its employees are fully invested in the tasks that lead to quantitative enhancement of the firm’s profits; but, as I argue below, such Ten Commandments type ethics codes completely fail to reflect the multidimensional complexities of the sorts of ethical dilemmas business people face in attempting to do their jobs – just as Asimov’s Three Laws failed to take the complexities of real world decision-making into account. Perhaps most important, Ten Commandments type codes are incapable of expressing what the late Robert Nozick calls ‘‘symbolic meaning.’’ In rejecting his own libertarian view of government (Nozick, 1974), Nozick (1989) says the following in The Examined Life: y[W]e want the institutions demarcating our lives together to express and saliently symbolize our desired mutual relations. Democratic institutions and the liberties coordinate with them are not simply effective means toward controlling the powers of government and directing these toward matters of joint concern; they themselves express and symbolize, in a[n]yofficial way, our equal human dignity, our autonomyy That symbolism is important to us. Within the operation of democratic institutions, too, we want expressions of the values that concern us and bind us together. The libertarian position I once propounded now seems to me seriously inadequate, in part because it did not fully knit the humane considerations and joint cooperative activities it left room for more closely into its fabric. It neglected the symbolic importance of an official political concern with issues or problems, as a way of marking their importancey, and hence of expressing, intensifying,yand validating our private actions and concerns toward them. Joint goals that the government ignores completelyytend to appear unworthy of our joint attention and hence to receive little. There are some things we choose to do together through government in solemn marking of our human solidarity, served by the fact that we do them together in this official fashion and often also by the content of the action itself (pp. 286–287, my italics).
Notice Nozick’s reference to an act’s content at the end of the passage. He is saying his state not only failed to express and symbolize our human dignity and the solidarity of our joint concerns; he is saying that, because of its narrow focus, his minimal government also took too narrow a view of the proper purposes of government. Nozick speaks about government, but I think his ideas apply to large corporations and their Ten Commandments type ethics codes. Their exclusive focus on the economic purposes of the corporation – enhancing the bottom line, increasing market share, and so on – are just not compatible with symbolically expressing our human solidarity with one another. Such codes say, very clearly, ‘‘if you want to survive in this company, you need to keep your nose clean with respect to this code.’’
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3. BRIEF HISTORY OF THE ‘‘WIDE REFLECTIVE EQUILIBRIUM’’ MODEL In his classic work in the philosophy of science, Nelson Goodman introduced a model for justifying induction, and answering David Hume’s problem. Goodman called his approach ‘‘reflective equilibrium.’’7 Hume had argued that inductive reasoning could not be justified inductively without begging the question. On the other hand, Hume argued, no deductive justification was possible because any attempt to do so would require a premise that postulated that the world behaves in an orderly manner. In short, such a premise would postulate that induction would work – again begging the question. Hume seemed to despair of finding any way to justify the type of inference that is the foundation of what many still believe is our most reliable source of knowledge – empirical science. Goodman maintained Hume was right. There is no way to justify inductive reasoning by showing it to rest on some sort of secure foundation. Instead, Goodman said, we should realize that inductive reasoning is so basic that all we can do is codify our individual and general intuitions. He suggested we consider two lists – one of particular inductive inferences we feel justified in making and the other of inductive principles or rules we tend to endorse. Then, argued Goodman, we should check these two lists against each other. When we find a conflict between a particular inductive inference and a general rule, we must eliminate one or the other, but there is no prescription for which should yield. Sometimes it will be the principle; sometimes the specific inference. Eventually, we will achieve, for the time being, an equilibrium between induction rules and particular inductive inferences. This, Goodman argued, is the only ‘‘justification of induction’’ that is possible. At this depth in our reasoning, codification through ‘‘reflective equilibrium’’ is all we can achieve.8 In his classic work A Theory of Justice (1971), and in his subsequent work in this area, John Rawls introduced the preeminent method of justification in ethics. Rawls, considered by many to be the most important social philosopher of the 20th century, argued that justification in ethics was so basic that it could not rest on some sort of ‘‘foundation.’’ Instead, following Goodman, Rawls argued that we should list the particular ethical judgments we accept, on one hand, and the general ethical principles we were comfortable with, on the other. Where conflicts occurred, either the particular judgment or the general principle would need to be rejected; but there was no ‘‘formula’’ giving one priority over the other. The equilibrium achieved through this on-going process constitutes the only justification Rawls found for either.
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In later work, Rawls introduced the idea that there was something else, besides particular ethical judgments and general moral principles, that needs to be made part of the equilibrium: our background assumptions. At this point, the term ‘‘wide reflective equilibrium’’ was introduced to describe the process of balancing all three of these sets of intuitions. The background assumptions, incidentally, often include the sorts of ‘‘stage-setting assumptions’’ that provide a context for the overall process. In the case of business ethics, for example, I believe the issue of whether business can be considered analogous to a game or major sport should be part of the background assumptions.9 This brief history is critical to what I am about to suggest because it shows that the wide reflective equilibrium approach to justification in ethics has its roots in philosophy of science and in some of the most highly regarded work in social justice in the last 60 years. This is arguably the most significant contemporary approach to justification in philosophy of science, social philosophy, and ethics in the literature of these disciplines.
4. WIDE REFLECTIVE EQUILIBRIUM AS A MODEL FOR JUSTIFYING CORPORATE CODES OF ETHICS As I said above, in the context of ethics, wide reflective equilibrium justifies actions as ethical by examining three areas – particular actions regarded as moral, accepted ethical principles, and background assumptions. Construction of a corporate ethics code might begin, for example, with a list of particular business activities that are typically deemed moral. The idea is to list ‘‘clear cases’’ that virtually all business professionals, and others in the broader community, would recognize as ‘‘ethical.’’ Second, the code might list ‘‘principles of action’’ generally accepted as circumscribing moral behavior. Finally, the third area of focus is on the background assumptions that are relevant to assessing the morality of business undertakings in the context of the large business entities that command our attention. In effect, these background assumptions will exemplify a ‘‘public philosophy of business.’’10 TO SUMMARIZE: the reason the philosophical tool I refer to is called the ‘‘wide reflective equilibrium’’ is that all three of these areas – judgments about the morality of particular actions, tentative conclusions about moral principles, and determinations about background assumptions – must be brought into ‘‘equilibrium.’’ This means that if there is a conflict among any of the three areas, adjustments must be made until equilibrium is achieved, that is, until there is no longer conflict. It is especially important to
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note that this method does not prejudge where the ‘‘adjustments’’ should be made. That is why this is a method of philosophical analysis. The final determination of how to bring things into agreement is a matter of weaving things together in a justifiable way – not of arbitrarily prioritizing one or more of these areas over the others. This approach distinguishes a new vision of a ‘‘corporate ethics code’’ from what I referred to above as the Ten Commandments approach.11 A proper corporate ethics code must involve all three of the areas referred to in the wide reflective equilibrium. Because a corporation can only act through its employees, the corporate ethics code must help create an environment conducive to ethical employee actions. Ethical principles, specific moral judgments, and background assumptions must all be oriented to this reality. For example, traditional economic criteria mandate that the bottom line determine the correctness or incorrectness of actions.12 Only by broadening this ‘‘background assumption’’ to include other considerations more conducive to ethical dealings by employees can a corporate ethics code be effective in changing the culture of a major corporation into an environment permeated by ethical considerations. In short, a corporate ethics code can help render the actions of a company’s employees more ethical only if it incorporates into the corporation’s background assumptions the idea that each employee is a human being and a member of a wider moral community – one that often prescribes actions that look beyond the belief that the bottom line (even in the so-called long run) is the only standard of business behavior. In this way, a wide reflective equilibrium type corporate code has the potential for expressing the sort of symbolic meaning Nozick refers to in the passage I quoted above. By utilizing a ‘‘public philosophy of business’’ consistent with the wide reflective equilibrium analysis I propose, the ethical principles that could be codified in a company’s corporate ethics code would reflect this background belief in employees’ essential humanity and present a list of particular business judgments deemed moral. Such judgments could be incorporated through contextual ‘‘stories’’ or ‘‘parables’’ to illustrate how the abstract ethical principles of the corporate ethics code are to be understood and implemented. It is currently widely accepted in philosophy that ‘‘narratives’’ are a powerful tool for shaping ethical behavior. The key point is that these particular judgments – perhaps conveyed through stories or parables – as well as these newly analyzed background assumptions are as much a part of the corporate ethics code as are the principles. By reconceiving how corporate ethics codes are constructed, we create a better framework for their utilization throughout the corporation.
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In effect, a wide reflective equilibrium type corporate code, with its emphasis on the essential humanity of the employees and its recognition of the artificial nature of the corporation itself (the fact that it is not a member of the moral community), endeavors to project the values of the individuals who make up the company back onto the corporation itself. Such a firm becomes a reflection of the truly human values of its people – not the other way around, as in the case of Ten Commandments type codes.
5. CONCLUSION To return to the Three Laws of Robotics, it is as if Isaac Asimov projected onto his robots the characteristics we want in those who serve us. We do not want them to harm us under any circumstances, but we do want them to obey our orders. Finally, they should protect themselves so long as doing so does not conflict with the principles of not harming us and obeying us. In the same way, corporations project onto their employees, via their Ten Commandments type ethics codes, the ‘‘qualities’’ they want their employees to exhibit in their jobs. Asimov’s Ten Commandments type rules suffer many of the deficiencies of such rules when they crop up in corporate codes of ethics. The three laws are imbued into Asimov’s robots, but their subtle interpretation is not, cannot be, infused into their ‘‘positronic brains.’’ Asimov imagined a world in which there exist robots with great power, speed, endurance, and so on, and he imagines that humanity is so frightened of these robots that people will not even permit robots be made without implanting these three rules to protect humans from them. We seem to have created a world in which our ‘‘social profit machines’’ are endowed with the central purpose of making as much profit as possible. But these ‘‘corporations’’ must employ ordinary people who have consciences and may try to ‘‘do the right thing’’ even when it is not the most ‘‘profitable’’ alternative. Therefore, corporations must have Ten Commandments type codes of ethics to control these potentially unruly corporate employees – ensuring that they focus on the bottom line, putting aside all other considerations. In the case of Asimov’s robots, humanity created machines with great physical power that then had to be controlled by the ‘‘laws of robotics.’’ In our world, we have created social profit machines; but their power to generate profits is tied to making their employees blind to any considerations other than enhancing corporate profits. In particular, employees must not be permitted to make choices ‘‘all things considered’’; they must not be permitted to act in ways most humans would consider
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(truly) ethical. Instilling employees with ten commandments type ethics codes is seen as a way to prevent such ethical but unprofitable acts. Changing the metaphor, this situation reminds me of Robert Sheckley’s (1953) short story ‘‘Watchbird.’’13 Written in 1953, near the beginning of the Cold War, the story imagines that the United States developed and set loose to fly around the world a type of monitor called the ‘‘Watchbird.’’ Thousands were manufactured and sent up. With their nuclear-powered fuel cells, they never needed to land. In a sense, they constituted a sort of anti-doomsday patrol. They had been given so much freedom that there was no obvious way to ‘‘recall’’ them in case their presence led to problems. And that is exactly what happened. The Watchbirds were capable of ‘‘learning.’’ Their immediate mission had been to prevent the killing of humans – to prevent, for example, nuclear war; but the Watchbirds quickly learned that there were other things that also needed to be protected – like insects. Farmers could no longer plow their fields because they would kill earthworms. Humanity began to starve. Something had to be done. The final paragraph of Sheckley’s story is chilling. It finds a Watchbird high above the earth, about to stop a farmer from plowing. Suddenly, a bolt of blue-white flame and the Watchbird tumbles toward a fiery crash – a victim of the newest technological marvel, the ‘‘Hawk.’’ Then Sheckley goes on to say that the Hawk, whose sole purpose was to kill, was now concerned with killing Watchbirds. But, Sheckley goes on, the Hawk was learning, there were other thingsythat also had to be killed. In a similar fashion, we created profit-making machines. When they needed more power, we endowed them with legal personhood. Now they are, in effect, telling their employees what they can and cannot do. We have created social machines that now threaten to control us – and ultimately to destroy us. Ultimately, we are responsible for making decisions about what should be done ‘‘all things considered.’’ We cannot delegate that responsibility, but we try. If we are to act ethically, choosing actions that should be done ‘‘all things considered,’’ we must take responsibility ourselves, whether for military decisions or (this paper’s focus) for economic ones. We should not try to find technological surrogates – whether physical or social – to which we can ‘‘assign’’ such judgments. They are ours to make, not ours to assign. The corporate codes of ethics we design must project our values onto the social inventions we call major corporations, not the other way around. I have argued that codes mediated by a ‘‘wide reflective equilibrium’’ are more conducive to this goal than the more popular Ten Commandments type corporate codes. Such codes are more apt to reflect the symbolic
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significance of our essential humanity than any simple list of rules, no matter how buttressed with detail about how such rules are to be ‘‘communicated’’ to employees so they can become ‘‘compliant’’ with them.
NOTES 1. See Benjamin and Curtis (1982, pp. 9–10). I do not limit this characterization of ethics to any one approach to the subject – deontological, utilitarian, etc. It also appears consistent with the ‘‘method of wide reflective equilibrium,’’ which John Rawls introduced into contemporary ethics literature. See Rawls (1971). 2. James E. Roper’s (2005), ‘‘How is Business Ethics Possible?’’ This paper appears in this volume. Also see Sen (2003), seriatim. Also see Ladd (1970). This is a major point of Ladd’s article. 3. See Roper (2004). Also, see above. 4. Joel Bakan (2004), in his book The Corporation: The Pathological Pursuit of Profit and Power (New York, The Free Press, 2004) argues that the modern publicly held corporation is a legal ‘‘person,’’ but that this ‘‘person’s’’ actions are analogous to those of a psychopath. I will address this analogical argument in another paper. 5. Nozick’s (1989) powerful statement on this issue appears in The Examined Life.Nozick (1993) also discusses this issue in The Nature of Rationality. 6. From The List of Lists, http://www.auburn.edu/vestmon/robotics.html (2001). 7. See Goodman (1983). 8. See endnote 7. Goodman claims that our justification of deductive reasoning follows a similar pattern. Some, for example, Wesley Salmon, have contended that deductive reasoning is much simpler to justify because we can rely on the idea that such inferences are truth preserving. (See Salmon et al., 1992) yGoodman never directly answered Salmon, but the direction of his answer is clear if we consider deductive reasoning at the deepest levels of mathematics. There, for example, we encounter the issue of whether the law of excluded middle can be used to construct indirect existence proofs in uncountable domains (like the set of real numbers). A huge controversy has raged over this issue and it is far from clear that the issue here is precisely parallel to that of justifying induction; but there are very suggestive similarities that are not addressed in Salmon’s critique of Goodman, which focuses on simple cases of deductive reasoning. 9. See Roper (2003) where I reject this assumption. 10. Ibid. 11. Allan Dershowitz (2003) has written in The Los Angeles Times about the fact that public discussions of ‘‘The Ten Commandments’’ do not reflect the complexities of Biblical reality. Dershowitz argues that the simple ‘‘list’’ of commandments are really just the ‘‘CliffsNotes’’ to the much longer discussion in the Old Testament – a discussion which Dershowitz maintains reflects ideas not usually associated with the ‘‘CliffsNotes’’ version. He argues that many of these ideas are not only alien to us but reflects ideas most Americans would reject. 12. See footnote #2. 13. This story was first published in Galaxy Magazine, in February 1953.
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ACKNOWLEDGMENT I thank my friend Mr. David Zin, an economist, for his advice regarding this study.
REFERENCES Bakan, J. (2004). The corporation: The pathological pursuit of profit and power. New York: The Free Press. Benjamin, M., & Curtis, J. (1982). Ethics in nursing. New York: Oxford University Press. Dershowitz, A. (2003). They’ve fallen off the top 10 list, Los Angeles Times, September 14, p. M.5. Goodman, N. (1983). Fact, fiction, and forecast (4th ed.). Cambridge, MA: Harvard University Press. Ladd, J. (1970). Morality and the ideal of rationality in formal organizations. The Monist, 54(4), 488–516. Nozick, R. (1974). Anarchy, state, and utopia. New York: Basic Books. Nozick, R. (1989). The examined life. New York: Simon and Schuster. Nozick, R. (1993). The nature of rationality. Princeton, NJ: Princeton University Press. Rawls, J. (1971). A theory of justice. Cambridge, MA: Belnap Press. Roper, J. E. (2003). Analogical reasoning and the public philosophy of business, In: M. Pava & P. Primeaux (Eds), Research in Ethical Issues in Organizations (Vol. 5, pp. 239–252). Oxford: Elsevier. Roper, J. E. (2004). Market failure, symbolic meaning, and the covenant of democracy. International Journal of Ethics, 3(3), 321–337. Roper, J. E. (2005). How is business ethics possible? Paper appears in this volume. Salmon, W. C., et al. (1992). Scientific explanation. In: M. H. Salmon, et al. (Eds), Introduction to the philosophy of science (pp. 7–41). Englewood Cliffs, NJ: Prentice Hall. Sen, A. (2003). Rationality and freedom. Cambridge: Harvard University Press. Sheckley, R. (1953). Watchbird, Galaxy Science Fiction Magazine, February. The List of Lists. http://www.auburn.edu/vestmon/robotics.html (2001).
THE RATIONALE FOR, AND SCOPE AND METHOD OF, TEACHING PROFESSIONAL ETHICS TO BUSINESS MANAGERS Kenneth S. Bigel ABSTRACT This paper picks up where an earlier one was left off by this same researcher. It asserts, as a starting point, that teaching professional ethics to business students yields positive results in terms of increased moral development. It then provides several rationales for justifying the teaching of professional ethics, which is a subject whose validity students – and some faculty – challenge. The method by which ethics ought to be delivered is then proffered. Some relevant questions are presented, including: ‘‘Should ethics be taught in the academy or in the workplace?’’ ‘‘What constitutes the proper content of a professional business ethics curriculum?’’
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1. BACKGROUND Any discussion of teaching professional business ethics must first consider its efficacy. Is it worthwhile to teach ethics based on the results? How may the results be assessed? Is ethical instruction a responsibility of the academy, which sends young men and women into the workplace, or the responsibility of the employers in whose workplace wrongdoing may occur? Finally, what should be taught in such a curriculum? This paper shall assert that, as a point of departure, ethics are indeed worth teaching. This position has been grounded in the psychology of moral development and related prior research findings. The limits of pedagogical effectiveness shall be defined. The focus herewith shall be on providing a context in which the teaching of professional ethics is justified, and presenting a method of ethical pedagogy, which has been proven to be efficacious, i.e., a research-tested curricular approach to teaching this subject shall be detailed.
2. CAN ETHICS BE TAUGHT? It has been claimed that ethics cannot be taught beyond a certain age. Conventional thought tends to equate education in ethics with character formation and thus assumes that ethics cannot be taught after the age of ten or twelvey (Piper, Gentile, & Parks, 1993, p. 14).
There have also been some findings to the contrary. y[M]oral education can continue into adulthood, andy particularly dramatic changes can occur in young adulthood in the context of professional school education (Piper et al., 1993, p. 13).A student’s nascent good character may be nurtured through education, just as a keen, young musical talent may be trained (Bigel, 2002, p. 129).
Should these latter assertions be true, an experimental test of the efficacy of ethics education should reflect an increase in students’ moral development after having completed a course in business and management ethics. One such study – conducted by this researcher (2002) – consisted of both undergraduate and graduate business students at a major metropolitan business school. The researcher administered Rest’s psychometric ‘‘Defining Issues Test’’ (DIT), which is an objective, psychometric measure of a person’s level of moral development, as both a pre-test and a post-test to several groups of business students, using the delivery of the ethics course as the test – or intervening – variable (the DIT will be discussed further below).
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If, as is claimed, ethics may be taught effectively, a person should score higher on a psychometric test of moral development after completing an ethics course than before taking the course. The researcher derived some statistically significant observations, including: 1. Post-test mean moral development scores were greater than the initial scores. 2. Undergraduate students showed greater increases in moral development than graduate students. In this connection, it must be noted that 88% of the undergraduate cohort was between the ages of 20–22, whereas 86% of the graduate cohort was between the ages of 25–32. Clearly, teaching professional business ethics properly yields positive results, albeit not uniformly across all cohorts. This is not to say that teaching business ethics improperly or ineffectively may not also produce positive results. The pedagogical methods utilized by the researcher, and discussed below, are consistent with the advice found in the moral development literature. Nonetheless, it is left as still to be determined whether business ethics may be taught better than as reported. In the next section, the structure of moral development is outlined briefly.
3. THE THEORY AND PSYCHOLOGY OF MORAL DEVELOPMENT The DIT is a well-tested medium by which Rest and others have gauged the level of one’s moral development. Since 1979, when the DIT was first created (Rest, 1979), it has been used in over 10,000 studies. In short, Rest’s taxonomy employs three levels of moral development, each of which is further divided into two stages, for a total of six stages in all (see Table 1). The three levels are: pre-conventional, conventional, and post-conventional morality. Only those individuals, who are most highly developed morally, will manifest psychometric scores indicative of the highest levels of moral development – ‘‘principled morality.’’ The DIT provides a measure called the ‘‘principled score’’ or ‘‘P-score’’ by which subjects can be measured as to the degree of moral development. The P-score measures the extent to which an individual processes a situation’s underlying ethical principles when arriving at a decision. As such, it is not prescriptive, but is intended to measure a cognitive process. The higher the P-score, the greater one’s moral development may be (Bigel, 2002, p. 128).
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Table 1. Stage Level
Six Stages in the Concept of Cooperation. Stage Description
Pre-conventional morality Stage 1 Stage 2
Behavioral Expectations
Obedience to others’ power Instrumental egoism and social exchange
‘‘Do what you’re told’’ People have their own interests ‘‘Let’s make a deal’’
Conventional morality Stage 3
Interpersonal concordance
Stage 4
Law and the social order
‘‘Be nice and you’ll make friends’’ Relationships, not one-time deals Everyone is obligated to and protected by law
Post-conventional/principled morality Stage 5 Political mechanisms Stage 6
Substantive justice
One is obligated by due process arrangements Ideal organization–rational and impartial
The research results cited earlier were implemented by experimental method, using the DIT (and the resulting P-score) as the intervening instrument. Using the pedagogical method outlined below (Section 9), the reported outcomes were, as noted above, positive. First, given the foregoing statements regarding the nature of moral development, we must address what properly constitutes the scope of a course in ethics?
4. THE SCOPE OF TEACHING ETHICS What specifically can be done in a course in business/management ethics that will positively affect students’ moral development? Rest (Rest, Narvaez, Bebeau, & Thoma, 1999) outlined the ‘‘Four-Component Model’’ of moral behavior (see Table 2 ), which represents all the relevant elements from problem awareness to implementation of the moral decision. The model may, incidentally, serve as a guideline for designing the ethics course. ‘‘The basic idea behind the four-component model is that various (four) inner psychological processes together give rise to outwardly observable behavior’’ (Rest et al., 1999, p. 101). According to Rest, in order for a person to manifest ‘‘ethical behavior’’ she/he must first be aware that the situation with which she/he is confronted indeed has ethical content. We may describe this first ‘‘component’’ as
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Table 2.
Rest’s Four-Component Model.
Component one
Moral sensitivity and awareness
Component two
Moral judgment or reasoning
Component three
Moral motivation and commitment
Component four
Moral character: Implementation and perseverance
‘‘I need to think this overy’’ ‘‘Something is not right here’’ ‘‘This action is (im-) moral becausey’’ ‘‘I will do this because it is righty’’ ‘‘This is worth it, in spite ofy’’
‘‘moral sensitivity’’ or ‘‘awareness.’’ In other words, in order to act ethically, one must first recognize that she/he is confronted with a situation in which an ethical dilemma is present. Many people are often quite oblivious to this aspect of life. A course that claims to teach professional business ethics must find a way to increase the students’ level of awareness – prior to tackling any other more ambitious tasks. Once a person recognizes the fecundity of the moral issues at hand, she/he may – or may not – employ moral reasoning tools, Rest’s second component. That is to say that although many are aware of the presence of an ethical dilemma, one may not be skilled at deriving the ‘‘proper’’ decision relative to a possible set of courses of actions. Thus, when it has been determined that a person has achieved a certain level of highly developed ethical reasoning capabilities, it may be said that pedagogical goals have been attained – assuming the examined subject had not already achieved high moral development. There are, however, more than just two components. In an interesting analysis of ‘‘insider trading’’ (i.e., the illegal purchase or sale of securities such as stocks or bonds based on private, non-public information for one’s self-aggrandizement), the following, education-related, comment, is cited: They assumed that somehow a course in business ethics would have changed the actions of the people caught in their illegal insider trading (DeGeorge, Richard as in Williams, Reilly, & Houck, 1989, p. 198).
The comment was made in light of a gift made to the Harvard Business School to strengthen business ethics’ teaching, rather than emphasizing any culpability on the part of the investment community. In other words, the classroom ends where work-life, and life, in general, begin. The instructor cannot mediate between the student and the implementation of ethical decisions and choices. In most instances, the researcher
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cannot observe the implementation of ethical decisions and assess the former student’s moral behavior. Moreover, very moral individuals may do immoral things if the ‘‘price is right.’’ Indeed, we all have our price – even those most highly morally developed. If the terms are favorable to doing the wrong thing, we may knowingly ignore the right thing. If something or someone near and dear to us is in need of assistance, we may throw morality to the wind; if a great deal of money may be made via immoral means, we may ‘‘go for it.’’ Each of us is capable of developing rationalizations for prioritizing non-moral concerns over moral ones. Nevertheless, there is a statistically significant relationship between moral development and ethical behavior (Rest & Narvaez, 1994; Bigel, 1998). Those who manifest high levels of moral development are likely to carry through and do what they think is right (Trevino & Nelson, 1995, p. 92).
At the time of the formal completion of one’s ethics education, the utilization of a means of measuring moral reasoning skills, i.e., of gauging one’s ‘‘moral development,’’ may be of value or interest. Rest’s Defining Issues Test (DIT), a psychometric gauge of moral development; has proven useful in many applications. Nonetheless, it must be recalled that a high level of moral development does not guarantee the implementation of appropriate moral preferences. Rest characterizes the nexus between moral development and actual behavior by means of the third and fourth components. The third component, ‘‘motivation and commitment,’’ addresses the extent to which an individual gives priority to moral over other concerns – independent of one’s superior (or not so) moral reasoning capabilities. Finally, without the fourth component, ‘‘implementation and perseverance,’’ we may not actually get behavioral implementation. Often, as in cases of whistle-blowers, one must undergo extended periods of stress during which the individual may be required, even by law, to justify his position or otherwise defend himself. Whistle-blowers notoriously are vilified and blackballed; they suffer immense personal, professional, financial, and emotional stress over extended periods of time. In recent years, there have been reports by whistle blowers at highly visible corporations including Enron, Xerox, Arthur Andersen, Prudential Financial, and many others. In the end, whistle blowers’ often Herculean efforts are not always vindicated. Thus, even though one may be motivated to ‘‘do the right thing,’’ she/he may fear personal and other repercussions. Still, as a practical
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matter, moral development (component two) and implementation are highly correlated.
5. THE PHILOSOPHIC JUSTIFICATION FOR TEACHING PROFESSIONAL BUSINESS ETHICS Moral education typically terminates in the (college or corporate) classroom; it cannot address implementation in reality. Students entering the professions, including medicine, law, and business (yes, business!) – as well as seasoned professionals – are very likely to encounter moral dilemmas, which shall require certain reasoning skills. Many of the dilemmas are apt to embody ethical considerations that have not yet been adjudicated. Yet, there is nothing that can be done in the classroom beyond increasing students’ ethical sensitivity and awareness, and providing them with the tools to think through the intricacies of a moral dilemma and to arrive at a moral choice. Still, if there is a higher purpose in moral education it is to produce individuals that not only do the former, but also actually behave morally. Why do we care so much about moral behavior? Should we care? A rationale for moral behavior espoused by Arrow (1973) is ‘‘economic efficiency.’’ That is, in a world of information asymmetry wherein knowledge is not evenly dispersed, economic efficiency is enhanced when people transacting business with one another trust each other; in the end, all society is better off. [A] great deal of economic life depends for its viability on a certain limited degree of ethical commitmentyThere is almost invariably some element of trust and confidence. Much business is done on the basis of verbal assurance (Arrow, 1973, p. 1).
Donaldson (2001) echoes a similar sentiment. Using analogical reasoning and borrowing from Ricardo’s (1817) theory of ‘‘Comparative Advantage,’’ he asserts that certain societies have competitive ethical advantages over others in a manner similar to Porter’s (1990) assertion that some countries have intrinsic and structural economic advantages over others. Donaldson further cites Fukuyama (1995) who maintained that certain societies have cultural advantages consisting of a kind of ‘‘social capital,’’ which provides competitive advantages. Donaldson goes so far as to enumerate several of these characteristics or ‘‘ethical economic advantages.’’ Societies manifesting these characteristics are noted for positive social values such as hard work, equitable distribution of ‘‘primary’’ (as opposed to luxury) goods, respect for intellectual property,
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protecting the environment, etc., and a lack of negative values such as bribery. All told, these factors add to the ‘‘wealth of a nation.’’ And, moral education furthers a nation’s comparative economic advantages. The answers are that that the values necessary to drive successful economies must maintain an element of intrinsic worth, and must be inculcated, at least partially, through a process of education (Donaldson, 2001, p. 35).
The foregoing arguments should provide the necessary and sufficient justifications for the study of business ethics – at the aggregate or national level. Still, many would argue that individual business students should study the law rather than ethics. At the local level, however, it may be asserted that the knowledge of ethics – together with a good conscience – precede any consideration of rightful or wrongful conduct. At an interpersonal level, in ‘‘daily life, we prefer doing business with people who show an independent concern for values’’ (Donaldson, 2001, p. 32). Moreover, the law is often incomplete and those who transgress the law, or otherwise exploit loopholes, are subjected to new tests and interpretations of the law. The law may be said, therefore, to be a ‘‘moving target,’’ and let the transgressor beware. If we accept Arrow, Donaldson and others arguments, ‘‘society’’ has a responsibility to educate its citizens in ethics to enhance economic efficiency and to better our lives. While formal education stops short of real-life implementation, the likelihood that one will actually implement ethically positive behavior is increased as one’s moral development is increased. Moral development may be increased through education. What is the best medium for delivering moral training and education to business students and working professionals?
6. THE APPROPRIATE MEDIUM OF ETHICS EDUCATION Assigning society’s responsibility for teaching business ethics to the corporation provides a sub-optimal solution to the problem of ethical behavior in the workplace. Most corporations that provide any ethics training at all do so with only limited time commitments and at superficial levels of instruction. Admittedly, this may be changing for the better. In the wake of numerous, highly visible, and large, corporate scandals, business is becoming more conscious of the need to maintain a high profile toward ethical matters. This involves training its personnel in corporate and business ethics.
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Sincerity may not be at the heart of the increasing trend toward corporate ethics training. The current United States Corporate Sentencing Guidelines (United States Sentencing Commission, 2004), which were originally enacted into federal law in 1991, provide corporations with an incentive to provide ethics training as a means to mitigate any potential fines that may be levied against the corporation in instances where employees have been found guilty of wrong doing (The Guidelines have come under some attack recently on constitutional grounds). In effect, by providing ethics instruction, the corporation may legally and effectively claim that it has diligently attempted to instruct employees in corporate matters of right and wrong, particularly as it pertains to the corporation’s line of business. If in certain instances, the corporation fails in achieving its explicit instructional objectives, it may then terminate the employee – or employees – and thereby demonstrate its willingness to get back on the ‘‘right path.’’ Corporations, thus, have some motivation to go through the motions with respect to ethics training. In short, corporate ethics programs are often insincere, too brief, and superficial. In contrast, the academy has highly skilled instructors who may, ideally, educate students in moral sensitivity and reasoning (i.e., Rest’s first two components) over the course of a full semester of study, as part of its regular course of study. Substantial gains may be realized in a formal classroom setting and it is best done at the undergraduate level, although it is not too late to provide ethics education at the graduate level for business students (Bigel, 2002). The corporation may then perpetuate and, thereby reinforce, this education. Indeed, reinforcement may be efficacious. In a study of financial planners, Bigel (1998) showed that after 10 years’ tenure, subjects’ moral development scores were lower than for those newer to that particular field. Should this finding be universalized, it would argue in favor of corporate ethics training and reinforcement. Is it reasonable to expect corporate management to pick up the reins? Should management pick up the reins?
7. DOES BUSINESS MANAGEMENT CONSTITUTE A BONA FIDE PROFESSION IN WHICH ETHICS HAS A PROPER PLACE? Does business management constitute a profession, which, as such, should require that its members abide by certain ethical standards? Professions in general may be delimited by the following two characteristics:
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1. Barriers to entry, which require that the prospective member demonstrate mastery of a well-defined body of knowledge. 2. Adherence to a specified code of conduct. The first characteristic is not of present concern. Regarding the second criterion, although business management is not universally thought of as a profession in the same vein as law, medicine, accounting, and others, certain significant parties do indeed hold that view, and some momentum appears to be gathering in the direction of professionalization. The renowned management expert, Peter Drucker (1998) wrote a book entitled ‘‘Peter Drucker on the Profession of Management.’’ In this book he refers to professional managers as responsible for making ‘‘effective’’ decisions, initiating innovation, enhancing productivity, and interacting with people. The language used throughout the book emphasizes ‘‘responsibility’’ and coping with rapid change. Moreover, If management was (sic) a licensed profession on a par with law or medicine, there might be fewer opportunities for corporate bad guys (Khurana, Nohria, & Penrice, 2005, p. 1).
The foregoing authors indicate that Americans have little trust in business executives as a result of the epidemic of corporate scandals in recent years emanating from ‘‘selfish conduct.’’ While many laws have been passed to promote ‘‘responsible conduct,’’ the legal and regulatory solutions are inefficient and expensive. Society has traditionally created institutions called ‘‘professions’’ in response to the need to regulate vital spheres of interest that affect others. In response to numerous scandals in its worldwide operations, Citigroup (2005), at this writing, has instituted a ‘‘Five-Point Plan,’’ which emphasizes its responsibilities to its clients, one another managers, and to the franchise. The plan focuses on expanded training – including ethics training, as well as improved communications, talent development, balanced performance appraisals and compensation, and strengthened controls. As a measure of the gravity with which the firm is taking this enterprise, Citigroup intends to deliver the plan via seminar to 300,000 of its employees. The jury may still be out as to whether business management, and especially large corporate management, which is responsible to myriad shareholders, constitutes a bona fide profession. It appears that the current movement is in the direction of professionalization. It also appears that a large part of this movement is oriented to ethical issues, a key ingredient of a profession. Still, this movement may be a superficial, even if expensive, effort to put on a good face in the public’s eye. Assuming corporations
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ought to require some ethics education, why should individuals be interested in acquiring these skills?
8. STUDENT RATIONALE FOR STUDYING BUSINESS ETHICS Many schools of business today require that students take a course in business ethics in order to graduate. Students are often skeptical as to why they must take such a course of study, particularly when it is perceived as not directly correlating with technical job skills and an eventual job placement. In this connection, it is imperative that they be provided with credible rationales for taking this course. This must come from reputable and cogent sources. There are some significant hurdles. Typical business texts in economics, finance, and other traditional business disciplines, assume ‘‘perfect markets,’’ i.e., that economic markets are characterized by information symmetry, and no public goods, monopoly and/or monopsony, or externalities. Markets therefore provide the optimal quantity of goods and services at market-clearing prices. In fact, market imperfections are common; meddlesome factors frequently dominate business transactions, and thereby affect price and quantity outcomes. The effect of this is that the equilibrium conditions predicted by standard analytic methods, which rely on perfect market assumptions, are frequently incorrect. Put differently, markets are characterized by ‘‘market failure,’’ or the inability to attain normal equilibrium conditions. Students must know and understand this in order to make decisions that optimize their goals. Students must also understand that market failure has moral implications. By way of example, the student may consider the circumstances in which it may or may not be ‘‘fair’’ for a party to a transaction to have more complete or accurate information about the transaction than one’s counter-party. When, if ever, would it be right for a manufacturer to dominate an industry? To what extent, if at all, should corporate polluters be held responsible for the mess they make? Finally, should we care? It is imperative that students confront economic matters in a moral context. Standard textbooks, while dealing more and more with these issues, usually do not go far enough. In recent times, we have seen many accounting and other fraudulent activities, and many failures in corporate governance. Executives are now being fined and occasionally imprisoned. Given this, one may recommend that students be taught business law in order to avoid future personal risks. This is not a bad idea. However, the
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study of law alone may encourage students to ‘‘game’’ the law, which, in the end, may lead to trouble. Furthermore, as noted above, the law itself is a moving target, which is subject to new interpretations and extensions, based on evolving circumstances. The law is also oftentimes vague and incomplete. The best protection against getting into trouble is to avoid engaging in activities, which are questionable. A keen sense of right and wrong, or a good conscience (Rest’s first component), and the ability to employ sophisticated and actionable moral reasoning tools (Rest’s second component) should be the first lines of protection against moral hazards.
9. PRESCRIPTION FOR THE MAXIMIZATION OF PEDAGOGICAL EFFICACY Bebeau (1993), in studying dental students, suggested basing professional ethics’ curricula on Rest’s Four-Component Model. She further suggested that students study cases involving ‘‘moral clues’’ in order to arouse ethical sensitivity. Students should practice professional responsibility by means of analysis and discussion of multiple case studies, covering a wide range of professional and inter-disciplinary issues, and be provided with feedback. Finally, students should be instructed in the specific techniques of moral argumentation and decision-making – both verbal and written. In typical academic environments, instruction in components one and two (but not three and four) may be delivered in the classroom. (In most circumstances – excluding internships and the like wherein behavior can be observed and critiqued, nothing may be done to positively affect components three and four.) In professional ethics courses at New York University’s Stern School of Business, Bigel (2002) utilized Bebeau’s suggestion concerning addressing Rest’s Four Component Model. He implemented an experimental method, which employed Rest’s DIT as the intervening variable, and reported that the students reflected improvements in their moral development scores (i.e., Rest’s ‘‘P-score’’) at semesters’ ends versus at their starts. In order to address Rest’s Four Component Model, the researcher initially exposed students to some simple scenarios, or case studies, within which a key player is exposed to a visible and compelling moral dilemma. The students were then called upon to simply state the dilemma. Students were instructed that a ‘‘dilemma’’ is a situation in which one must choose from two, more or less equally undesirable, alternatives. The
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students were further instructed that ‘‘indecision is not an option,’’ that they do not have the luxury of indecision, that business people must always make ‘‘active’’ decisions that engage their intellects, and that even a ‘‘do nothing’’ choice ought to be an active decision. Simply put, ‘‘passivity’’ is not a trait that business managers and leaders can afford to exhibit at any time – even when the matter at hand does not appear to be particularly relevant to their technical ‘‘job descriptions.’’ Thus, at first, the student may be exposed to a situation and its embedded dilemma, in which, for example, a manager must consider whether to fire or retain a certain employee. It is not entirely clear that the person should be fired as this would, inter-alia, leave the firm understaffed; moreover, the person did no wrong, but may simply not be qualified for the added responsibilities that the position will soon require versus the past nature of the job. The class is then, early on, exposed to a debatable matter regarding a moral dilemma, i.e., ‘‘termination,’’ and, with the instructor’s assistance, an impassioned debate ensues (for an incomplete list of possible ‘‘ethical issues,’’ see the appendix). Students are encouraged to take and defend their positions in a professional manner. Such debates serve to heighten ethical ‘‘awareness.’’ Early on, the students are also presented with numerous readings from philosophic, legal, and religious sources; this proceeds for the balance of the term, whereby students will be reading both case studies and ‘‘background’’ literature. These readings provide students with some essential bases, frameworks, or models, upon which to justify or rationalize their moral decisions. The students learn that the background literature provides a ‘‘framework’’ upon which one may base a decision, as one might do in employing the ‘‘dividend discount model’’ in assessing the value of a stock and deciding whether to buy or sell the said instrument. The course, in so doing, rises to an incidental exercise in critical thinking skills as applied to moral reasoning, consistent with Rest’s six-stage taxonomy. As the semester progresses, students are exposed to a mix of contemporary business case studies in which managers must choose from two or more alternative courses of action; students offer resolutions. It is important that the topics be as timely as possible in order to arouse students’ interest and debate. It is not important precisely what mix is presented during the term, as long as the mix is varied, popular, and compelling. Students must state their choices in class, outline the dilemma, and take and defend their positions. Thus students are increasingly called on to provide a short list of relevant facts from case studies, state their actionable decision based on the facts – as
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they see them, and justify their position by employing a relevant ethical, legal, or other framework. For example, one may say that it is unethical to fire an employee who has been loyal and diligent in his work on the basis of a ‘‘categorical imperative,’’ such as loyalty, that a Kantian may espouse. Conflicting, alternative resolutions may also be provided, which are cogently argued and based on other frameworks. These exercises are effected verbally in class on an individual basis and by debate, as well as by means of numerous short, written submissions and a longer, final submission. Students thereby learn that it is OK to disagree with one another – in a respectful manner. They also learn that legitimate, but conflicting decisions or choices may abound simultaneously. Outcomes are unknown; hence decisions must be evaluated without any hindsight benefits. The development, articulation, and cogency of the decision are the important factors. Disagreement must be respected. Students learn that even in the sciences, which we assume to be absolute and certain, there is an element of subjectivity. We once asserted, based on empiricism, that the earth was the center of the universe. One’s selection of two or three key facts from a case may also represent an element of subjectivity. Students will disagree as to the relevance or weight of certain facts. At this point, usually before the midpoint of the semester the students will discuss the following quote: Nature gets credit, which should in turn be reserved for ourselves; the rose for its scent; the nightingale for his song; and the sun for its radiance. The poets are entirely mistaken. They should address their lyrics to themselves, and should turn them into odes of selfcongratulation on the excellency of the human mind. Nature is a dull affair, soundless, colourless; merely the hurrying of material, endlessly, meaninglessly (Whitehead, 1925, p. 56).
Students learn that it is we who select facts, and frame decisions by means of the ‘‘excellency of our minds.’’ Of course, they are also taught to respect the law to which all society defers. In spite of this subjectivity or relativism, they must also discover the extent to which there are universal moral axioms, which are inviolable. Students are taught at approximately mid-semester, the basic elements of both Rest’s Four Component Model and the taxonomy of moral development. At this point, the instructor may observe that there may be some students, usually a very small group, who do not ‘‘buy into’’ this structure and means of thinking. Using the method outlined above, Bigel (2002) reported statistically significant increases in moral development (i.e., P-scores) for both undergraduate and graduate students over the course of a semester at a major
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metropolitan university. It is expected that the developmental improvement will translate into positive ethical action in the workplace. What about experienced professionals? In a study of financial planners, Bigel (1998) found that moral development scores declined from ‘‘experienced’’ planners with 5 years experience to ‘‘established’’ planners with more than 10 years experience. The corporation may perpetuate and preserve any moral development enhancements achieved in the university by means of quality, continuing professional education initiatives.
10. CONCLUSION The pedagogical method outlined above yielded statistically significant improvements in moral development at a major, metropolitan university as reported earlier (Bigel, 2002). Given the ubiquity of market failure, it is important that students understand the nature of imperfect markets and the context in which real-world market circumstances come about. Further, we all benefit economically if market players are moral. The best, practical business ethical instruction may be provided at the university, with periodic follow-up in the workplace. Students and working adults need to be exposed both to a wide range of compelling moral dilemmas and ethical philosophies that may be used as decision frameworks. An appropriate moral education curriculum for the corporation needs to be developed; it may vary by industry, and by employee status and tenure. A follow-up study may contrast the effect of a properly designed corporate ethics training program for highly experienced staff versus a control group. Further recommendations for maximizing moral development may also be explored.
REFERENCES Arrow, K. J. (1973). Social responsibility and economic efficiency. Public Policy, 21(Summer) The President and Fellows of Hardvard College, Boston, MA. Bebeau, M. J. (1993). Designing an outcome-based ethics curriculum for professional education: Strategies and evidence of effectiveness. Journal of Moral Education, 22(3), 313–326. Bigel, K. S. (1998). The correlations of professionalziation and compensation sources with the ethical development of personal investment planners. Financial Services Review (Vol. 7, 223–236). Elsevier Science Inc., New York, NY.
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Bigel, K. S. (2002). The impact of a business ethics course on the moral development of undergraduate and graduate business students. The DPE Journal, XLIV(2) (125–138). Delta Pi Epsilon, Little Rock, AR. Citigroup. (2005). Supporting materials for the five point plan. http://www.citigroup.com/press/ 2005/data/050214b1.pdf Donaldson, T. (2001). The ethical wealth of nations. Journal of Business Ethics, 31(1, Part 1) (25–36). Kluwer Academic Publishers, Dordrecht, The Netherlands. Drucker, P. (1998). Peter Drucker on the profession of management. Cambridge, MA: Harvard Business Review Book Series. Fukuyama, F. (1995). Trust: The social virtues and the creation of prosperity. New York, NY: The Free Press. Khurana, R., Nohria, N., & Penrice, D. (2005). Is business management a profession? Harvard business school working knowledge. http://hbswk.hbs.edu Piper, T. R., Gentile, M. C., & Parks, S. D. (1993). Can ethics be taught? Perspectives, challenges, and approaches at the Harvard Business School. Boston, MA: Harvard Business School. Porter, M. E. (1990). The competitive advantage of nations. New York, NY: Free Press. Rest, J. R. (1979). Development in judging moral issues. Minneapolis, MN: University of Minnesota Press. Rest, J. R., & Narvaez, D. (1994). Moral development in the professions: Psychology and applied ethics. Hillsdale, NJ: Erlbaum. Rest, J., Narvaez, D., Bebeau, M. J., & Thoma, S. J. (1999). Post-conventional moral thinking: A Neo-Kohlbergian approach. Mahwah, NJ: Erlbaum. Ricardo, D. (1817). On the principles of political economy and taxation. http:www.econlib.org/ library/Ricardo/ricP.html Trevino, L. K., & Nelson, K. A. (1995). Managing business ethics: Straight talk about how to do it right. New York, NY: Wiley. United States Sentencing Commission. (2004). The federal sentencing guidelines manual (2003 Ed.). St. Paul, MN: West Group. Whitehead, A. N. (1925). Science and the modern world. New York: The Macmillan Company. Williams, O. F., Reilly, F. K., & Houck, J. W. (1989). Ethics and the investment industry. Savage, MD: Rowman & Littelfield Publishers, Inc.
APPENDIX List of Possible Ethical Issues for Discussion Agency and fiduciary responsibilities Corporate intelligence Discrimination and diversity Downsizing and termination Gifts and bribery Insider trading Intellectual property and trade secrets
Loyalty Market manipulation Marketing and product liability Privacy Sexual harassment Truth and transparency Whistle blowing
‘‘ARE PROFESSIONALS MYTHICAL HEROES?’’ Michel Dion INTRODUCTION Western societies are not ‘‘a-moralized.’’ We could observe ‘‘ethical etiquette’’ everywhere, in every social institution and concerning every human activity or field of research (codes of ethics, ethics committees, Government ethics laws and so forth). The moralization processes of Western societies appear to be actualized in a dialectical way, and that process involves three patterns of actions undertaken by most of the social groups and institutions: (1) to get rid of an external (heteronomous) morality; (2) to adopt an inner (autonomous) morality; and (3) to safeguard two equivocal attitudes: (a) excluding any moral issue from one’s decision-making and paradigmatic beliefs individuals adhere to (in order to explain the systemic reality of their self, world and Nature); and (b) letting to the given social groups and institutions (professions, for instance) the responsibility to provide the moral foundations of social life. In neo-liberalistic societies, where individualism has reached its peak, moral responsibility is more and more considered as a constraint to the ‘‘desire to do what we wish to do.’’ Indeed, such a desire serves to define the meaning of freedom in neo-liberalistic societies, although the meaning expresses a distorted form of freedom: to do whatever we like, except if it tends to reduce others’ freedom. Such a meaning does not imply to serve society or to love each other. Crisis and Opportunity in the Professions Research in Ethical Issues in Organizations, Volume 6, 221–235 Copyright r 2005 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 1529-2096/doi:10.1016/S1529-2096(05)06013-X
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According to Durkheim1 and Parsons,2 professions express altruistic ethics and contribute to stabilize neo-liberalistic societies, in re-orienting their practices, needs and beliefs towards public interest or common good. Parsons said that a professional role is predominantly institutionalized in terms of collectivity-oriented functions rather than self-oriented functions.3 A system of morals is always the affair of a group and can operate only if this group protects them by its authority. It is made up of rules which govern individuals, which compel them to act in such and such a way, and which impose limits to their inclinations and forbid them to go beyond. Now there is only one moral power – moral, and hence common to all – which stands above the individual and which can legitimately make laws for him, and that it is collective power. To the extent the individual is left to his own devices and freed from all social constraint, he is unfettered too by all moral constraint. It is not possible for professional ethics to escape this fundamental condition of any system of morals. Since, then, the society as a whole feels no concern in professional ethics, it is imperative that there be special groups in the society, within which these morals may be evolved, and whose business it is to see they be observed. Such groups are and can only be formed by bringing together individuals of the same profession or professional groups (y) And thus the peculiar characteristic of this kind of morals shows up with even greater point than any so far made: we see in it a real decentralization of the moral life. Whilst public opinion, which lies at the base of common morality, is diffused throughout society, without our being able to say exactly that it lies in one place rather than another, the ethics of each profession are localized within a limited region. (y) Each branch of professional ethics being the product of the professional group, its nature will be that of the group. In general, all things being equal, the greater the strength of the group structure, the more numerous are the moral rules appropriate to it and the greater the authority they have over their members.4
Some professions, particularly in the health system, tend to develop themselves much more outside than within their traditional ‘‘loci’’ (hospitals, for instance). Psychologists and social workers are likely to be more ‘‘welcome’’ in community groups, although the financial sustainability of such organizations is endangered by the growing development of the traditional loci (hospitals) that give physicians much more day-to-day power on their financial advantages and social prestige as well as on their objectives and strategic plans adopted by the political wing. According to Toulmin,5 there is an implicit social contract between professions and society to the effect that a given social group that meets some criteria will be recognized as a profession, so that its members will get some advantages and privileges that non-professional groups do not have (including a legal or quasi-legal monopoly on the professional services within its own section of professional activities). However, such advantages and privileges are given in exchange for a basic orientation towards public interest or common good. The social contract is indeed, implicitly negotiated
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by the legislative body and the professional group. Such a basic orientation towards common good is believed to justify the professional monopoly on given professional services. In this article, we would like to describe a tendency in the professions, at least a trend we could observe in Western societies. It does not reflect a huge paradigmatic change within professions. Rather, what we call the ‘‘mythogenetic profession’’ is a profession that is creating myths about its own expertise and activities, so that its members (the professionals) are perceived and perceive themselves as ‘‘mythical heroes.’’ Such a myth of professionals as mythical heroes (or a kind of supra-natural beings) implies that the profession actually creates its own professional ideologies, parcels all professional tasks within its own traditional ‘‘loci’’ and uses a hermetic language in order to increase its powers on the clients.
THE MYTHOGENETIC PROFESSIONS According to Mircea Eliade, myths tell how supra-natural beings have made it possible to give birth to a given reality, whether it is the global reality (Cosmos) or part of it (a given social institution). Myths reveal the creative activities of those supra-natural beings. They reveal various (and sometimes dramatic) manifestations of the sacred within the world. Mythical heroes are people who can find out solutions to mythical predicaments, said Caillois.6 According to Eliade, supra-natural beings do not belong to the ordinary world (of the daily life). Because of the action of supra-natural beings, human being is what he (she) is now. According to Eliade, myths tell the history of what supra-natural beings have done. Such history is sacred, since it has been created out of the actions undertaken by supra-natural beings. Human being is now the direct result of mythical events; he (she) has been existentially constituted by such events. Because myths reveal the sacred powers of supra-natural beings, they become the basic pattern for all significant human activities, including work and education. Myths reveal how given social institutions or models of work have appeared throughout human history (since the origin). That is why, said Eliade, myths represent the paradigms of all significant human actions.7 Eliade said that the first self-manifestation of a given reality is equivalent to its creation by the supra-natural beings. Rediscovering the Time of the origin thus implies to ritually repeat the creative acts of such mythical heroes. The periodic or sequential reactualization of such actions undertaken by supra-natural beings constitutes the sacred ‘‘calendar,’’ that is, the set of
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sacred feasts or events. Archaic societies believe that their members actually live in another Time (a sacred Time) when they succeed to recover the mythical (non-historical) Time through given rituals and feasts. They become contemporaneous to the mythical events. They go out of their historical Time and reach the primordial, unchanging (eternal) Time, a Time that is not subjected to the temporal (secular) duration, a Time that is constituted by an ‘‘eternal present’’ we could always recover through the accomplishment of rituals. Archaic societies perceived that the sacred Time makes it possible to have a secular duration in which our individual and social existence is involved. The ‘‘eternal present’’ of mythical events makes it possible for our historical existence to have a (secular) duration. The sacred Time is the exemplary model for the historical (secular) Time. Because of the mythical actions of supra-natural beings, everything has become ‘‘existing.’’ Existence has been created by supra-natural beings. Rituals and feasts recover the sacred dimension of human existence and make people more aware of the origin of human beings as well as the origin of social behaviours or practical social roles and tasks. We could say that rituals and feasts accomplished in archaic societies show how much their members wished to live quite close to the supra-natural beings, to live ‘‘in their (mysterious) presence,’’ in that Time when they were creating or organizing the world, or revealing to human beings how to live in such a world. But in doing so, they try to recover what they perceived as a ‘‘perfect world,’’ that world as it was when it has been created by supra-natural beings. The actions undertaken by supra-natural beings in the mythical (sacred) Time are mysterious because we could only know them out of the way they were revealed to us by such mythical heroes. When myths are manifested through rituals and feasts, people are telling the events of the origin and claiming that such primordial events can be recovered in the historical Time. They believe that it is only in imitating supra-natural beings – their mythical actions being the exemplary model for all human actions – that they can truly be human and that their existence can be safeguarded from a ‘‘fall into nothingness.’’8 In Western societies, we could identify three major types of ideologies that give birth to mythical heroes: (1) politics and economy: mythical heroes appear to be charismatic and visionary leaders in the political or the economic sphere; (2) religion: mythical heroes are then prophets, saints, mystics, people who grasp the deep wisdom conveyed in the sacred texts and are able to put them in practice; and (3) community life: mythical heroes are then activists who offer their life for defending a given social group or promoting the common good. What is more and more arising is a fourth
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type of ideology that gives birth to a new kind of mythical heroes: professional ideology and professionals as mythical heroes. It is not a worldly phenomenon. It is rather a growing trend we could observe in the way professions are creating and reinforcing their own culture. Mythogenetic professions are those professions that are creating and reinforcing the myth of professionals as supra-natural beings (or mythical heroes). Professions can set up an image of the professionals as mythical heroes, thus expressing how heroic are their procedures to ensure that their members (professionals) actually serve the public interest. Indeed, professions must decide to what extent they will focus on their regulatory processes in order to safeguard either the public interest or the private interests of their members. The myth of professionals as mythical heroes (or the myth of nobility9): professional ideologies presuppose that: (a) professional work has an inherent worth; and (b) professionals act in a disinterested manner towards public interest. Indeed, professions (as well as labour unions and cooperatives) are social bodies that have been set up in order to reduce the abuses and distortions of economic liberalism. They must aim at the public interest, according to the ‘‘implicit social contract’’ between professions and society: (i) on one hand, professions get financial rewards (higher wages), prestige and the monopoly of a given market of professional services; and (ii) on the other hand, professions must safeguard the public interest (and never the sole private interest of their members). It means that professionals must be deeply aware of the moral responsibility, at the individual and the collective level as well. Such an assertion reveals that professionals must take into account the larger interests and those of their clients: the interests of local communities and of humanity as such.10 The myth of professionals as social heroes is particularly expressed in the way professions have let a complex of infallibility growing among its members. We could observe a growing skepticism towards professions. Such skepticism is mainly due to the attitude of self-glorification among professionals. It is actualized in situations where a specific good (or interests) inspires or requires from clients an absolute trust or obedience towards professions and when such professionals have made promises they cannot fulfil. Such a social skepticism towards professions arises out of a complex of infallibility that is revealed in traditional professions. Traditional professions impose their rules on the whole society and use individuals as means for developing their expertise and reaching their personal objectives. When professionals share a complex of infallibility through their professional activities and tasks, the social scepticism such a social phenomenon has given birth to is actually a way to reflect an existential meaning of truth (rather than a social
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class-oriented concept of truth). Social skepticism towards professions is also a way to react against professional abuses, so that it then favours any basic struggle for democracy and actually translates an existential meaning of truth and freedom. Many clients said that a professional is ‘‘the one who says and who can do something relevant for me.’’ Professionals are believed to actually know the problem and the way to resolve it. That’s why many professionals tend to set up their professional activities in a strict connection with clients’ expectations and desires. Many professionals believe that they are ‘‘the one who must know and must act.’’ It means that a professional has no right to ignore something that is important for his (her) client. He has no right to doubt or hesitate when choosing among alternative actions. Indeed, due to material (economic) benefits, his (her) self-love, his (her) prestige, he (she) acts without considering the limits of his (her) knowledge or power. This is the phenomenon of a ‘‘totalized professional certainty.’’ A professional who is aware that he (she) lacks an important, relevant knowledge and that he (she) must always act ‘‘as if he (she) would know everything important for his (her) clients’’ feel a deep anxiety and will try to get rid of it in showing a (superficial) self-confidence, in order to counterbalance his (her) bad conscience. Any profession needs to believe that he (she) holds an absolute knowledge and power in order to safeguard his (her) self-confidence. Professions then veil the uncertainties of human life. Such a distortion of human existence can make professions the slaves of their self-image, so that in some professions, it could open the door to manipulation and delusion, used to get rid of mistakes and misunderstandings. The impossibility to commit any mistake and the (false) claim that such mistakes do not have negative effects are ways to avoid professional (collective and individual) responsibilities. The myth of professionals as social heroes is structured by three mythical components: (a) The myth of the double moral consciousness: professional ideologies are conveying the belief that professionals must conform themselves to a specific set of values and norms of behaviour because of their professional activities. They are saying that the way professionals will accomplish their professional tasks must exclude any other kind of values and norms of conduct. Montaigne (1533–1592) actually reinforced such a myth in using two arguments: (a) other values and norms of conduct that do not follow from professional deontology are irrelevant and cannot improve the quality of professional services;11 and (b) we are not personally responsible for the contents of our professional deontological
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rules, so that we only have to put them into practice.12 As said by Applbaum (1999), sometimes ‘‘socially useful roles require the development of vices and the suppression of virtues, so that good professionals become bad people, even when they are temperamentally well suited and psychologically well adjusted to the task.’’13 The myth of a double moral consciousness is particularly revealed in the way professions set up and express their own ideologies. It reinforces the belief that professionals are ‘‘supra-natural beings’’ or mythical heroes who are able to hold two different (parallel) moral universes. Even gods cannot do that. Indeed, professionals as mythical heroes seem to be able to define their conduct according to two different set of values and norms (the moral universe of the ordinary citizen, and the moral universe of the professional). (b) The bourgeois myth of atomistic/independent individuals:14 professional ideologies claim that citizens are believed to voluntarily establish a neutral/objective State that maintains a free market for the benefice of all, and that sets up social stratifications depending on natural talents. Professional ideologies convey that professionals are voluntarily selected by their clients, because of personal, fiduciary and confidential relationships they are believed to have with them.15 Such a myth is expressed in the way professions jointly parcel the whole set of professional tasks and activities. (c) The myth of wise and sympathetic persons: clients perceive their professionals as having the quality of ‘‘practical wisdom.’’16 But it is not so clear that professional roles and deontological rules ensure that every professional gets the opportunity to develop a practical wisdom in his (her) professional life. Moreover, according to Hume, when we look at the poor and the needy, people in distress and if we can help them, we will immediately try to help them. Those who need our help make us feel as if we were their ‘‘parents,’’ so that we tend to protect and care them.17 The professional would then, as a human being, try to protect his (her) clients from any kind of threats, insofar as such clients are perceived as ‘‘people in need.’’ The myth of wise and sympathetic professionals is particularly manifested in the growing complexity of professional language used into professional–client relationships. Within the professional–client relationships, there is a growing loss of an authentic encounter. When we ask for professional expertise, we need a professional who holds the required qualifications to practice his (her) profession. However, we do not ask to be considered as a machine, an object that can be used by others, then denying our subjectivity (through which we
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know what it means to be human). Looking at others as machines is considering them as objects (then denying any subjectivity to them).Transforming humans into machines will also transform organizational cultures as machines, since the way people are considered actually moulds what is kept as an integral part of organizational culture.18 Professionals should always remind that it is our whole life that is at stake within the professional–client relationships. As said by Gabriel Marcel (1951), the way we treat others and the representations of others we are creating actually contribute to transform them, that is, to make them better people or to degrade them.19 The de-personalization of professions actually shows that there is no longer an authentic encounter between a profession and his (her) client, that is, a loss of existential communication, would say Jaspers.20 In some cases, professions could encourage, if not create, some type of problems in order to insure and enhance their ability to resolve complex problems as professionals. Clients are then considered as objects. That was exactly the critique raised by the anti-psychiatry school (Laing, Szasz).21 Ivan Illich then talked about ‘‘iatrogenetic sicknesses.’’22 The mythogenetic professions presuppose a total identification of the person to its professional role. Sartre (1957) said that we should never identify ourselves to our social roles since we are then negating that space in which we could create our self, the space of our existential freedom. We must always be able to define ourselves, whatever our social roles could be. Social roles are provided by society, so that when we act in accordance to such roles, we only respond to social expectations towards our occupation. When we totally identify ourselves to our professional role, we are neglecting that we must be free to choose other alternatives of action. We simply accept our professional duties and responsibilities without questioning them. An absolute identification to our social role is a way to escape our existential freedom and thus our responsibility for what we are and what we do, because projecting ourselves into such a social role implies to transfer our responsibilities over others. Sartre thought we should have a minimal identification to our social role, in order to avoid the external (social, legal) effects of non-identification.23 Deifying professional roles and deontological rules implies (a) a contamination of the professional moral universe into the personal, social and family life of the professional: professional values are then integrated into the personal, social and family life of the professional, so that it could follow that the morality of the ordinary citizen is absorbed by the professional moral universe; and (b) a reduction of any possible contamination of the moral universe of the ordinary citizen into the professional life: personal,
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social and family values are less and less integrated into the professional life, so that it could follow that the professional morality is unlikely to be determined as the moral universe of the ordinary citizen.
CONVEYING PROFESSIONAL IDEOLOGIES A code of professional deontology claims that a given profession is regulated by moral standards. It reveals a public image that the profession wants to mirror into the public space. The more idealized this image of the profession is, the more adjustable to its ideological goals the profession is (and the less realistic towards operational norms the profession actually is). The ideological self-glorification tends to reduce the efficiency of professional self-regulation. A code of professional deontology can be a useful means within the socialization processes characterizing the professional milieu. It can create a sense of unity among professionals who belong to a given profession. A code of professional deontology can also be used to raise technical norms of expertise among professionals. Larson24 argues that professional ideologies serve to safeguard the monopolistic markets of given professions, as well as the social status (prestige and social/financial benefits) of their members. According to Larson, there are four basic contradictions between professional ideologies and professions’ claims: (1) professional ideologies claim that professional groups are focusing on service (serving public interest) rather than profit (serving selfinterest), without any particular concern for given social classes. In fact, professions pursue a higher economic/social status and serve the interests of the ruling classes; (2) professional ideologies justify exceptional rewards given to professionals who have shown a higher degree of expertise (meritocracy). They are ignoring the fact that privileges and autonomous practices are provided by the whole society; (3) professional ideologies claim that professional work is more valuable than non-professional work. In fact, what many professionals do in their daily life is closer to non-professional practices than to idealized image of their professions; (4) and professional ideologies take for granted that professions are communitarian groups enhancing higher ethical norms that make them unable to manage any monopolistic approach of public or private services. In fact, the actualization of all principles and values enhanced within the professional self-regulation remains an illusion. Professional ideologies consist in ideas about professions, professionals and the notion of professionalism given professions are adhering to. They
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are used to get or maintain the control on the market of professional services and the social/economic status of their members (Kultgen). Codes of professional deontology can be used for ideological purposes. Such codes convey the perception that a given profession is led by ethical concerns and define what is considered as ethical practices in given professions. In fact, such a perception can be actually right, insofar as the moral consciousness of professionals that has been excited through the period of professional socialization (training and university programme before being accepted as members of the profession) remains a living reality in professional daily life. The perception that professions are guided by ethical concerns and define what they considered as ethical or unethical practices is right, insofar as professional norms of ethical behaviour are reinforced throughout the professional culture (the culture characterizing the professional group). As said by Mount (1990), professions (as well as organizations) that provide the settings of our daily endeavours have traditions, values, styles of operations and tendencies that cannot be reduced to those adopted by the individuals who have created them.25
PARCELLING PROFESSIONAL TASKS We could more and more observe that when we consult a given professional (lawyer, physician, for instance) – so that we agree to let him (her) manage some aspects of our life, such a professional is unable to accomplish all professional tasks connected to our whole life (in which various problematic situations could coexist). The personalized relationship between a professional and his (her) client is then evacuated. We are now part of a professional system in which professionals are connected to one another, through economic, social and sometimes political interests. However, the trust clients actually have in their professionals still exists. What is arising is a growing hypertrophy of functionarism, a bureaucracy that gives us absolute guarantees of existential security. The basic existential outcome is that our being is then loosing its vitality, its dynamism that makes life a process rather than a pure linear growth. Professionals offer their services to a ‘‘being-in-situation,’’ that is, a being whose existential condition is determined by situations he (she) is involved in. Being-in-situation is both a finite and estranged being. On one hand, it expresses the existential state of estrangement that has been historically and culturally manifested in neurosis, social domination (sexism, racism, for instance) and quasi-religious and demonization processes (cf. communism,
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fascism, nazism). On the other hand, being-in-situation is impregnated by a feeling of existential insecurity and existential anxiety that moulds the various forms of psychological anxiety. Existential anxiety is the awareness of our finitude (death, sickness, faults).26 Professionals help us to get rid of such psychological anxiety or distress, but have much less ability to help people manage their existential anxiety and despair. While psychological anxiety and despair have a precise object to be connected with, it is not true for existential anxiety and existential despair, said Kierkegaard.27 Only few psychologists and physicians are open to spiritual and religious aspects of existence that are implied in existential anxiety or existential despair.28 Their technical (and even psychotherapeutic) expertise is not enough. Technocracies characterizing professionals imply a high level of scientist idolatry and put technicality into human relationships with clients and open the door to the depersonalization of clients, and thus of professionals. Clients then become objects that require services from professionals. They must have qualities of empathy for people and be able to give the best of their heart to help others and give them some hope. What clients require the most from professionals is hope (to overcome their actual predicament). Professionals must be bearers of hope. They must take it for granted that a human being is not only a mechanical entity that cannot know the process through which its actions could be explained. Human being also owns creative faculties and abilities giving birth to virtues and values (human being as bearer of values). When professionals take it for granted that they can control every aspect of human nature, they are denying the unknowable mystery of human beings and reducing a human person to physiological mechanisms and psychological faculties. Such an attitude reveals a kind of psychological technocracy. It is clearly opposed to clients’ expectation to the effect that they would be treated as human beings as such. When a given client is considered as an ‘‘interesting case’’ in the professional–client relationship, he (she) is dehumanized, so that it will result in the depersonalization of professions.
LANGUAGE AND PROFESSIONAL–CLIENT RELATIONSHIPS Professionals hold a technical or scientific language that they have learnt before they have been admitted as members of the profession, a language that both justifies his (her) expertise and remains unintelligible from the perspective of clients. The issue of language within the professional–client
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relationships remain a critical one, if professionals really want to develop an authentic relationship with their clients. Authenticity implies the self-awareness. Authentic existence is to be aware of our existential finitude. An authentic being is a being considering himself (herself) as finite. Because our existence consist in the fact that we ‘‘are with’’ other beings, authenticity presupposes that we are aware of others’ self.29 Within professional–client relationships, (particularly in criminal trials), professionals must assess the risks that the client (who is saying to his lawyer that he will kill someone, or beat his wife or drug his children, for instance) is saying the truth and will put his words in practice. Professionals should then perceive the probability that such intents could be actualized by their clients. The way the lawyers interpret such intents depend on their ability to grasp the language used by their clients and the risks connected to the words they have used. Language is care-for-others. As citizens, professionals are concerned with the existential condition of the poor and the needy, of their neighbours, and of their parents and children. It is within the ‘‘not-said’’ that the language (as care for others) is taking place. The ‘‘non-said’’ is particularly important in criminal trials where lawyers must know all relevant facts in order to be able to do their job correctly. The efficiency of what they say will depend on the way they have been able to get rid of their clients’ ‘‘not-said.’’ But lawyers must conform themselves to their duty of confidentiality. They must keep confidential what their clients have said to them, with the expectation that their lawyers are reliable. Otherwise, clients will no longer be able to say to their lawyers anything that could compromise them, so that lawyers will lack relevant information they need to prepare themselves for the trials. Lawyers are then in a kind of ‘‘trilemma’’: knowing everything (from the client’s perspective), keeping everything confidential (client’s expectation) and revealing everything to the Court.30 However, professionals do not act as ordinary citizens when they are dealing with professional issues with their clients. They are then acting as professionals. They can still be concerned with the existential condition of their clients. But if they believe that their clients are unable to identify the consequences of their actions, professionals could no longer respect their promises of confidentiality. Its care-for-others is then rooted in its own field of expertise. There is a language connection between a lawyer (whose language is less concrete and more hermetic, full of abstract concepts) and his (her) clients (whose language is more or less concrete and full of hermetic notions following from his (her) individual or social life. Clients try to understand what their lawyers say and do not say to them. On the other hand, lawyers
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attempt to grasp to what extent clients’ sayings are true or could reflect the reality. Between lawyers and their clients, there is a ‘‘language game,’’ by which each language (lawyer’s language, client’s language) is asserting its own existence and exclusiveness and tries to understand the contents conveyed by the other’s language. When lawyers and their clients talk about confidentiality, they are using, as a frame of reference involving notions of good-itself and justice-itself, their own language (that defines themselves as professionals or clients) and their ability to grasp the others’ signs and words. Confidentiality is a moral duty that is rooted in human language, since it is linked to the communicational act. Human being is the being-of-language that has access to what he (she) is only through authentic relationships with others, to the non-self. The perceptions of what is true/false, good/bad, just/ unjust are integral part of the communicational act between various beingsof-language. When clients expect that professionals will respect their duty of confidentiality in all circumstances, such an expectation is both rooted in rules of professional deontology and the representation they have of professionals as such. Social expectations towards professional roles tend to be translated in a specific expectation that professionals will always conform themselves to their duty of confidentiality. In the context of the ‘‘language game’’ occurring between professionals and clients, there is an enigmatic space where each partner of the social exchange tends to reject the mysterious character of human language and then to close the way to any authentic relationships between professionals and their clients. Such a risk is always present during communicational acts. That’s why professionals must become aware that language is and must always remain care-for-others. Otherwise, language will become an instrument of self-reclusion for both professionals and clients. In that sense, there is no future for any duty of confidentiality if professionals are not re-immersed in language.
CONCLUSION Myths imply an act of belief in the reality of its object. According to Cassirer, myths have a double aspect: (a) a conceptual structure: a set of unorganized and confused ideas; and (b) a perceptual structure: its own way to perceive the world. The world that is perceived through myths is a dramatic world, a world of ‘‘conflicting powers.’’ Mythical thought implies the belief in a basic solidarity of life’’ that can explain the multiplicity of individual life forms.
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Society is then the ‘‘society of life.’’ Human being has no privileged rank in this society. There is a basic unity of life.31 On one hand, we could say that mythogenetic professions convey a set of ideas and beliefs (then fulfilling an ideological function) – although such ideas are not really confused, but rather well organized under the professional culture characterizing one or the other profession. On the other hand, we could observe that their ideologies impose a given perception or understanding of human life. What is then lacking is the solidarity of life (through which all life forms are interdependent) we could find in archaic societies. But such solidarity was directly connected to collectivistic modes of life. In Western societies, we are facing hyper-individualistic societies, so that the ‘‘solidarity of life’’ is no longer projected on a social level, but rather on a social group level, the professional associations. The solidarity of life that mythical thought is focusing on is indeed the solidarity that makes members of a given profession interdependent.
NOTES 1. E´mile Durkheim, De la division du travail social, Paris, PUF, 1967. 2. Talcott Parsons, ‘‘The Professions and Social Structure,’’ Essays in Sociological Theory, New York, Free Press, 1964, pp. 34–39. 3. Talcott Parsons, The Social System, New York, The Free Press, 1951, p. 343. 4. Emile Durkheim, Professional Ethics and Civic Morals, Glencoe, The Free Press, 1958, pp. 6–7. 5. Stephen Toulmin, ‘‘The Meaning of Professionalism: Doctors’ Ethics and Biomedical Science,’’ Knowledge, Value, and Belief (H.T. Engelhardt Jr. and D. Callaghan, eds.), Hastings-on-Hudson, Hastings Center, 1977, pp. 256–268. 6. Roger Caillois, Le mythe et l’homme, Paris, Coll. ‘‘Ide´es,’’ no 262, Gallimard, 1972, pp. 25–27. 7. Mircea Eliade, Aspects du mythe, Paris, Coll. ‘‘Ide´es,’’ no 32, Gallimard, 1963, pp. 15–18, 21–23, 116—117. 8. Mircea Eliade, Le sacre´ et le profane, Paris, Coll. ‘‘Folio/Essais,’’ no 82, Gallimard, 1965, pp. 73–96. 9. Magali Larson, The Rise of Professionalism, Berkeley, University of California Press, 1977, pp. 220–224. 10. Hans Jonas, Le principe responsabilite´. Une e´thique pour la civilisation technologique, Paris, Cerf, 1990, pp. 30–32. 11. Michel de Montaigne, Essais I, Paris, Gallimard, 1965, p. 276 (Book 1, chapter XXVIII). 12. Michel de Montaigne, Essai. Tome III, Paris, Gallimard, 1965, p. 250 (Book 3, chapter X). 13. Arthur Isak Applbaum, Ethics for Adversaries. The Morality of Roles in Public and Professional Life, Princeton, Princeton University Press, 1999, p. 66.
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14. Larson, The Rise of Professionalism, Berkeley, University of California Press, 1977, pp. 220–224. 15. John Kultgen, ‘‘The Ideological Use of Professional Codes,’’ Business and Professional Ethics Journal, vol. 1, no 3, 1982, pp. 53–69; Michael Bayles, Professional Ethics, Belmont, Wadsworth Publishing, 1981; Alan H. Goldman, The Moral Foundations of Professional Ethics, Totowa, Rowman & Littlefield, 1980. 16. See Aristotle, The Nicomachean Ethics, Ware, Wordsworth, 1996, pp. 149–167 (Book VI, 1140a24-1145a11). 17. David Hume, An Enquiry Concerning the Principles of Morals, Indianapolis, Hackett Publishing Company, 1983, pp. 43–51. 18. Gareth Morgan, Images of Organization, Newbury Park, Sage Publications, 1986, pp. 19–38. 19. Gabriel Marcel, Les hommes contre l’humain, Paris, Fayard, 1951. 20. Karl Jaspers, Philosophy, Chicago, Chicago University Press, 1969. 21. Thomas Szasz, The Myth of Mental Illness, New York, Harper & Row, 1974; R.D. Laing and A. Esterson, Sanity, Madness, and the Family, New York, Basic Books, 1964. 22. Ivan Illich, Medical Nemesis. The Expropriation of Health, London, Calder & Boyars, 1976. 23. Jean-Paul Sartre, Existentialism and Human Emotions, New York, Washington Square Press, 1957, pp. 9–51. 24. Larson (1977), The Rise of Professionalism, pp. 8, 66, 105. 25. Eric Mount Jr., Professional Ethics in Context. Institutions, Images, and Empathy, Louisville, Westminster/John Knox Press, 1990, p. 31. 26. Paul Tillich, The Courage to Be, New Haven, Yale University Press, 1952, pp. 64–85. 27. Soe¨ren Kierkegaard, Fear and Trembling and The Sickness Unto Death, Princeton, Princeton University Press, 1974; The Concept of Anxiety, Princeton, Princeton University Press, 1980. 28. See: Rollo May, The Meaning of Anxiety, New York, Washington Square Press, 1977; Victor Frankl, The Unheard Cry for Meaning: Psychotherapy and Humanism, New York, Simon & Schuster, 1978. 29. Martin Heidegger, Being and Time, New York, Harper & Row, 1962, p. 264. 30. Alan Donagan, ‘‘Confidentiality in the Adversary System,’’ The Good Lawyer: Lawyers’ Role and Lawyers’ Ethics (David Luban, ed.), Totawa, Rowman and Allanheld, 1984, pp. 123–149. 31. Ernst Cassirer, An Essay on Man. An Introduction to a Philosophy of Human Culture, New York, Bantam Books, 1970, pp. 83–84, 90–91.
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