If the 16th century statesman and philosopher Sir Francis Bacon could have foreseen America’s 21st century corporations he would have appended “and so too is pretense” to his dictum, “knowledge is power.” Corporations today along with their government stooges maintain power partly by keeping the public in the dark and by pretending to be and do what they are not being and doing.
A corporation is made up of many parts. Some of them are charades. One of them is the corporate ethics program. This article is about it. Other articles will eventually follow on the other parts. The next essay will be about corporate social responsibility programs.
As long as the general public is duped and stays duped corporations and their government stooges will continue pretending they are putting people, peace and the environment over profit and power. When you think about it, the entire corporation is a charade, not just particular parts of it. The U.S. Supreme Court farcically ruled in 2010 that corporations are persons. People who really believe that carry on conversations with stuffies. If only corporations were as benign as stuffies!
Part 1: Corporate Ethics Programs
Corporations have become masterful at talking but not walking ethics. I will share with you a true story of a corporation where ethics were reserved for showcasing in the window. It is a story with thousands of small variations throughout Corporate America.
(1) A True Story
After allegedly repeated and egregious wrongdoing, the defense contractor General Dynamics finally got a directive from the government in 1985 barring the company from further business orders until it established a compliance program. 1 The company quickly responded by retaining an ethics consulting firm to draft an ethics code, creating an ethics committee of outsiders to serve on the board of directors, hiring an outsider to be the corporate ethics program director, holding ethics workshops for employees, and opening a hotline for whistleblowers.
The ban was lifted in three months (Uncle Sam needs its war products). The ethics program director was honored in a feature article of a professional journal in which he was quoted as advising companies to “do a few things very well because only a few things really need to be done.” 2
Well, not exactly, Mr. Ethics Program Director. While a compliance program may help a company meet its contractual and other legal obligations, it can’t help put a company on higher moral ground, and may even perpetuate wrongdoing by giving the company a false sense of immunity.3 This particular defense contractor is a case in point. The author tracked publicity about General Dynamics for several years following its heralded compliance program. Among the reported misdeeds were low balling bids, violation of safety regulations, a bonus plan for the top 25 managers 4 deemed “just outrageous” by a government official5 and, in the last file entry (before I went on to other matters until now), giving a 10-year employee a layoff notice the very day the employee returned from bereavement leave following the death of the employee’s young son.6
(2) And Decades Later, A Web of Pretense
Currently, if you go to General Dynamics’ website you will see a picture of a “Stryker armored combat vehicle” that was used heavily in the Iraq war (add bells and whistles to a tank, give it a new name and make a killing).7 Under the picture is this caption, “STRENGTH ON YOUR SIDE” “We adhere to the highest standards of conduct and ethics.” You are then directed to click on “About Our Ethics.” Before going there, stop and think a moment about the sheer hype and falsity of what you have just seen and read. There is absolutely nothing ethical about a combat tank and everything immoral and murderous. Moreover, the implication that there’s “peace through strength” is sheer PR.
Now, let’s “click” and see what’s there. “—we know each day our employees will make decisions that are critical to our success [as a war profiteer]. To help ensure those decisions meet our company’s ethical standards, General Dynamics Board of Directors and management have devoted significant time and resources to maintaining an active and robust ethics program.”
Well, let’s see what that program is. There’s 13 business unit ethics officers and 120 local ethics officers who implement the ethics program by carrying out a list of seven responsibilities that include distributing the ethics handbook, maintaining “a 24-hour-a-day, seven-day- a-week, confidential Business Ethics Helpline-callers may remain anonymous if they wish (they sure as H— better), and “conducting and overseeing prompt, thorough and objective investigations of all reported allegations of suspected ethical misconduct and taking corrective action, if necessary.”
Déjà Vu. Has General Dynamics been implicated in fraud cases since its ethics program was touted nearly 30 years ago? In 1990 it settled (paying a meager $8 million fine) a government lawsuit charging the company with defrauding the Army on contracts for M-1 tanks. In the mid-1990s there were indications that General Dynamics had bribed the South Korean president to facilitate a deal to spend $5 billion on the company’s F-16 fighter jets. In 2004 it and General Motors signed a consent agreement to settle charges that they violated the Arms Export Control Act through the unauthorized export of technical data and defense services. In2008 its Electric Boat subsidiary signed a consent order with the state of Connecticut and paid $75,000 to settle violations relating to the discharge of pollutants into the Thames River. In 2008 a Congressional committee blamed poor management by the Defense Department and General Dynamics for billions of dollars in cost overruns and delays in a Marine Corps tank program. 8 In 2008 General Dynamics settled for $4 million for fraudulently overbilling the Navy.9
Has General Dynamics been whistle clean since 2008? I don’t know if it’s now fraud-free but it certainly hasn’t stopped its war profiteering. Its lobbyists, backed up by huge political campaign donations, managed to override the Pentagon’s objections (because it had too many tanks and was mothballing some of them) and “bribe” Congress into extending at a cost of billions to taxpayers the M1 Abrams tank program. 10 That is an example of how one of the five largest defense contractors in the world operates presumably fraud-free.
There was at least one ethical employee at General Dynamics, Brandon Toy. A published copy of his recent resignation letter has “gone viral, racketing tens of thousands of views on social media sites as attention continues to climb.”11 Mr. Toy, who had worked for the company five years, is quoted in his protesting of the company’s “arming of U.S. led wars” as saying that, “I have always believed that if every foot soldier threw down his rifle war would end. I hereby throw mine down.” And he encouraged others to follow suit. This story reminds me of the phrase, “what if there were a war and no one came.”
Corporate Ethics Programs in General, Not Just in General Dynamics
Even if a rare corporate CEO was intent on his corporation being whistle clean, establishing an official ethics program would not be the way to go about it. Ethics programs are flawed in their makeup. They include codes of ethics but they are usually highly legalistic, often quickly forgotten, and essentially worthless (remember Exron? it was said to have had a “model” code of ethics).12 The value of ethics workshops, another program element, is limited because not behaving ethically is more a matter of not wanting to do so than not knowing how to do so, and because what is learned in any workshop may not transfer or last long back on the job. Creating institutional entities such as a position of ethics director and an ethics committee may actually displace or diminish personal responsibility for ethical behavior as we witnessed in the case of General Dynamics. And turning to hotlines, their deterrence and corrective capability is limited if they are seen as inconsequential or as a precursor to retaliation. Permitting anonymous reports may not necessarily provide cover when detailed information is required that might unveil the reporter. Any policy of anonymity, furthermore, can be criticized as authorizing illegitimate concealment, and when transgressions are involved, can be criticized as having “to hide in order to say anything of ethical consequence” and of being tantamount to “citizens without citizenship.”13
In one of my books describing a model of a “great” corporation I wrote that it would have “no officious ethics.”14 I concluded the book’s section on this topic by writing: “The corporation may not be able to ditch its compliance program if it is a government contractor. But the corporation can do everything possible to streamline perfunctory “Officious Ethics” and mainstream real ethics into every day corporate behavior. The absolutely best way to do that is to mainstream ethics into the way performance is managed in the corporation, the subject of the next and last chapter.”
In other words, forget ethics programs and instead manage performance the right way. That includes setting noble, not ignoble (e.g., “do whatever is necessary”), monitoring and appraising performance against those expectations, rewarding positive results (e.g., beneficial ones), and punishing the wrong results (e.g., harmful ones). But that scenario will never happen with any corporate members of the corpocracy where ignoble expectations and minimum if any accountability for criminality let alone for “merely” unethical behavior are business as usual.
- W. F. Buckley, “The Defense Bilkers”, <em>The Washington Post</em>, August 20, 1985, Op Ed page. [↩]
- W. H. Wagel. 1987. A New Focus on Business Ethics at General Dynamics. Personnel, 1987, 64: pp. 4-8. [↩]
- P. Dwyer & S. Payne, “The General Dynamics Case Sets a Bad Precedent”, Business Week, June 8, 1987, p. 41; [↩]
- Ellis, J. E. and Payne, S. 1991. “More Instant Cash than a Lottery: Under GD’s Plan, Managers Get a Windfall-and Shareholders Get Ulcers.” Business Week, May 20, 42.; [↩]
- M. Lawrence, OSHA Fines Shipbuilder $615,000, The Washington Post, July 30, 1987, pp. E1-2; [↩]
- S. Marshall, “After Son’s Death, a Pink Slip for Dad”, USA TODAY, March 26, 1993, pp. 3A [↩]
- About General Dynamics [↩]
- These five transgressions were reported by Phil Mattera, General Dynamics, Crocodyl.org (the corporate malfeasance wiki of Corporatewatch.org). [↩]
- Reuters, “General Dynamics Settles Navy Fraud Case at $4 Mln”, August 18, 2008. [↩]
- Aaron Mehta and Lydia Mulvany, “The Army Tank that could not be Stopped, Center for Public Integtity”, July 30, 2012. [↩]
- Sarah Lazare, “Military Industry Employee ‘Throws Down Rifle’ for ‘Good of the World”‘ Common Dreams, July 17, 2013. [↩]
- M. C. Mathews, Strategic Interventions in Organizations: Resolving Ethical Dilemmas, Sage, 1988. [↩]
- C. F. Alford, C.F., Whistleblowers: Broken Lives and Organizational Power, Cornell University Press Ithaca, 2001, p36. [↩]
- Gary B. Brumback, The Corpocracy and Megaliio’s Turn Up Strategy, Democracy Power Press, Amazon Kindle Edition, 2012. [↩]