Rethinking business culture

Citation

Ali, A.J. (2008), "Rethinking business culture", International Journal of Commerce and Management, Vol. 18 No. 3. https://doi.org/10.1108/ijcoma.2008.34818caa.001

Rethinking business culture

Article Type: Editorial From: International Journal of Commerce and Management, Volume 18, Issue 3

For over two centuries and across the globe, American business models have been admired and thought to facilitate prosperity through sound business practices. Despite cultural differences, countries in Asia, Europe, and Latin America have enthusiastically and with creativity applied American approaches and models. These models are products of a culture that once valued hard work, integrity, market transparency, and accountability.

The current credit and mortgage crises and the multiplication of various forms of fraud point to a troubling era where public faith in corporate ethical conduct has reached its lowest level. Fortune magazine (June 9, 2008) has labeled this era, “the wink-and-nod” where senior mangers “want results,” at any expense and with no details. Faced with persistent pressures to perform and motivated to boost their year-end bonuses, employees are tempted to engage in questionable practices and overlook risky consequences.

The “the wink-and-nod” era in business practice has led to serious deceptions and frauds. A number of frauds have resulted in the collapse of corporations, displacement of workers, and hardship for millions of people. Most importantly, it has led people across the globe to have less faith in the ability of the market system and existing mechanisms to deter bad practice and corruption.

It is a mistake to treat the rise of “the wink-and-nod” era as a passing phenomenon which is limited to a few greedy executives. Rather, this era is the natural outcome of the emergence of flexible ethics and the prevailing ideology which places individual fame and interest ahead of corporations and society. Indeed, as we mentioned in 2002, flexible ethics substitute morally sanctioned conduct and hard work for anything that maximizes wealth and fame. Rules and established guidelines are viewed with maximum discretion and can be molded, if not ignored, to facilitate an individual’s fame and prestige.

Flexible ethics not only tolerate bad practices but gives justification for the unbridled pursuit of self-interest and indulgence irrespective of the harmful consequences to others. It places considerable emphasis on immediate gratification. Reason and responsible conduct are put aside and deceptions are viewed as part of normalcy. The latter constitutes a threat to American tradition where confidence in market mechanisms is nurtured and the norms of the level playing field are sanctioned.

Since the rise of corporate scandals, in recent years, there have been persistent calls for tightening regulations or introducing new regulations. As the current credit and mortgage crises emerged, the Federal Reserve in the USA adopted sweeping rules on July 14, 2008 which are aimed at preventing deceptive lending. In fact, the Chairman of the Federal Reserve, Ben Bernanke, called for “a more robust framework for the prudential supervision of investment banks and other large securities dealers.” Other government and trade institutions have also come up with new guidelines and rules.

Critics may argue that the new rules and regulations are fine but in a rapidly changing global economy and in the absence of moral clarity, corrupt individuals always know ways to circumvent the new systems and escape scrutiny. What is needed is a new culture which sanctions and reinforces ethical conduct and highlights the virtue of pursuing self-interest in the context of corporate and societal interest. That is, the new culture should strike a balance among individual, corporate, and societal interests.

Business schools, along with social institutions, be they family or church, have a role to play in facilitating the emergence of a new culture. In particular, business schools and business scholars should underscore the fact that scandalous and fraudulent practices not only erode market confidence and cost individuals and institutions billions of dollars, but also those who have committed frauds and questionable practices often end up in jail. Examples of executives at WorldCom, Enron, Tyco, Hollinger Intl, Adelphia, ImClone, among others, should be taught in the early years and introduced in more detail in the senior year so future executives have plenty of time to ponder the necessity of moral and responsible business conduct.

While the recurrence of financial crises, corporate scandals, and frauds are a reminder that regulations must be flexible and adaptive to emerging circumstances, their recurrence also underlines the fact that in the absence of moral clarity and individual responsibility toward society and the organization, the urge to deceive is a factor that must be contained. This is possible only when individuals and corporations look beyond their immediate interests.

Abbas J. Ali