Political Ethics

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• In Business,

I teach business ethics. And as I talk about the importance of ethics in business, it is always interesting to see the similarities between business ethics and political ethics. Given what is going on in Washington, D.C. and Olympia I thought it would be interesting to explore those similarities in more depth. At the start of each quarter we explore the different stakeholders that business has to deal with. The chart shows the business stakeholder model including shareholders, customers, employees, suppliers, communities, environment, and government as major stakeholders. When any business makes a decision that is going to impact one or more of these stakeholders, it becomes an ethical issue. As a class we talk about what is important to each of the different stakeholders and the result is about 100-150 different needs that businesses have to pay attention to. I define business ethics as the responsibility of business to balance the needs of each of those stakeholders and make sure that decisions do not unnecessarily harm one stakeholder while benefiting another. For example, if you do have to terminate employees, at least do it in a manner to retain the dignity and respect of the employee. The ultimate challenge a business leader faces is dealing with the wide variety of needs amongst all the various stakeholders.

Politicians face a similar stakeholder model. Each politician has to deal with his/her political party as well as voters, special interest groups, citizens in their districts (who may or may not vote), citizens outside their district, business interests and other governments (for instance federal politicians have responsibilities to their state and local governments.) Each of these stakeholders has a wide variety of needs and an ethical politician will learn to balance these needs and not make decisions that unduly impact one stakeholder over another.

One big issue in business is the power of the shareholders (or owners) of the company. Often a decision is made that benefits the shareholders at the expense of other stakeholders. In fact, many business classes teach that the primary responsibility of business is to make a profit for their shareholders/owners (a policy I then need to de-program). Politicians face their own powerful stakeholder in the form of their political party. The party is responsible for that politician's committee assignments, legislative support, campaign fundraising, and 'get out the vote' efforts. This creates the business equivalent of shareholders and politicians face a lot of pressure to support one stakeholder, often at the expense of other political stakeholders.

The second most powerful stakeholder for business is customers, who can inflict serious harm on a company if they choose to boycott that business's product. There is such a direct link between customers and the financial health of a company that business has to watch its patrons very carefully to make sure decisions will not negatively impact the customer. The equivalent of this relationship for a politician is the special interest groups who provide the bulk of campaign financing. Like businesses monitoring customers, politicians have to monitor special interest groups who can make or break political futures.

In business, the dynamic that shareholders and customers have so much power makes it difficult for other stakeholders, who are often subject to harmful decisions in order to protect “more important” stakeholders. This situation creates most of the ethical issues in business. One of the foundations for successful market economies is that businesses must behave ethically, an increasingly difficult challenge. Politicians face the same dynamic, but in that instance political parties and special interest groups hold more sway in decision making than other stakeholders. This creates one of the foundational pieces required for democracies to work, as politicians have to behave ethically and figure out how to balance all stakeholders, not just their political party and special interest groups. As long as politicians behave unethically by shortchanging other stakeholders to maintain their ties with special interest groups and political parties, we will continue to struggle.

I also teach that transparency and communication are the two requirements for managing all stakeholders. Businesses have to be completely transparent with everyone or, even if they are acting ethically, they may have the appearance of impropriety. To make sure needs are being met and issues dealt with in a timely fashion, business must communicate with all stakeholders on a regular basis. Politicians must act in a transparent manner as well. If our politicians are not transparent, even if they are doing the right things they can be perceived as acting unethically, simply because it is easy to assume they are hiding things. Secret meetings and closed-door negotiations, voting on 2,000 page bills before anyone can read them, special agreements with special interest groups, middle of the night debates and votes all lead to the appearance of a lack of ethics. The health care bill may still pass, but the politicians advocating the bill have already lost. Based on a political stakeholder model, there is no way any politician can say the process has been ethical. When Washington is making Enron look ethical, you know you have a problem.

It is increasingly important that business balances the needs of all of their stakeholders, but it is even more important that politicians recognize they have to balance the needs of all their stakeholders. There are some politicians who need to spend less time editorializing on the ethics of various industries, and spend more time worrying about their own lack of ethics.

About Craig Mayberry

Closed Account • Member since Jan 17, 2008

While writing his articles from 2008 to 2011, Craig lived near Lynden and taught at both Whatcom Community College and Western Washington University. He was active in politics and ran for public [...]

Comments by Readers

David Camp

Jan 16, 2010

Craig,

I think it is naive to expect business institutions whose strongest motivation (as you point out) is profit to act ethically without strong regulation. Your stakeholder model is interesting, but business only considers stakeholders insofar as they affect profit - a business may regard customers as stakeholders but pleases them only in order to increase profits.

This is a stark statement of American capitalism, one which in my experience is widely held to be true. It is based on desire for profit, otherwise known as greed.

I know of no ethical system, nor religion (religions comprise the majority of ethical systems subscribed to by humans) which considers greed to be virtuous. On the contrary, ALL the monotheistic religions (Christianity, Islam, and Judaism) have multiple laws and injunctions against greed, usury, wealth accumulation for its own sake, and so on. Some Christian scripture: “it is harder for a rich man to enter the kingdom of heaven than for a camel to pas through the eye of a needle”; “forgive us our debts, as we forgive our debtors”; “blessed are the meek, for they shall inherit the earth”. Moreover, the Bible is quite clear that there should be a regular “Jubilee”, a festival when all debts are forgiven. The year 2000 should have been a Jubilee year; instead we got the orgy of corruption, greed, and unjust dominion which was the Bush administration, and we now are living with the consequences: an economy laid waste by greed and irresponsibility, supported by induced fear and war hysteria. And all for the profit of the greedy few.

This institutionalized greed is also, in my opinion, the source of the corruption in the federal government. Thie interests of the people are secondary to the moneyed corporate interests to which our “representatives” are beholden for the money which buys them their sinecures. The entire apparatus is corrupted by this dynamic.

I admit to disgust and fear at a federal government run amuck, but I have few solutions other than to stop supporting it. Vote with your dollars - why pay to watch the corporatist propaganda which infects the public airwaves? Why slave away to pay federal taxes and support the corrupt machine? Why put your trust in that which has clearly been taken over by interests hostile to yours?

Wherefore is Babylon to be found?

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Tip Johnson

Jan 16, 2010

Whenever this conversation (frequently) comes up, I always try to refer folks to the Mondragon Cooperative Corporation.

Their model keeps capital subservient to the public good with education and employment at the core.

Gee, maybe that’s godless communism, but maybe not.  They have transformed the Basque region of Spain from the poorest areas in Europe to one of the wealthiest.  They have some of the best health and welfare programs.  They hew to equitable principals - the average wage disparity between workers being 5:1.  Management is rotated through the ranks. Business is built from stable sub-assemblies, lending flexibility and endurance to the system.

It’s an excellent model of alternative economics, but one which fails to get any traction in so-called capitalist (corporate welfare) states.  Obama’s bailout could have initiated community structures like the Mondragons employed to drag themselves out of abject poverty.  If the bailout had been distributed to communities on a population basis, Whatcom County would have received over $520 million for deposit, creating a lending capacity over $3 billion.  We could have fixed our local economies and let the big banks fend for themselves.

Now they are posting record profits, still not loaning money, still selling bunk paper, and gearing up for big, big bonuses, again.

Oh well.

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Riley Sweeney

Jan 17, 2010

There is one important factor that I think makes business ethics and political ethics different. Customers can do IMMEDIATE damage to a company that they feel is acting poorly. They can stop buying their product tomorrow. Politicians often aren’t answerable for two, four or even six years later. This allows for plenty of time for the voters to forget, the special interests to be woo-ed, etc.

Look at the double stepping that Joe Lieberman can get away with, he isn’t up for reelection for another two years. Or Ben Nelson or Max Baucus. They are relying on the fact that no one will remember in two, four or six years.

On the other hand, when the politician IS immediately answerable, they tend to act more ethical. Still, it is very dicey.

This is why I am glad that Rob McKenna is looking into the unethical behavior of Ward Nelson in his quest for the appointment to Bob Kelly’s seat. We need accountability in all institutions, business or political.

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Craig Mayberry

Jan 17, 2010

David,

If you think about it, all regulation is the result of unethical behavior.  If companies engage in unethical behavior, eventually people get frustrated and lobby their government officials to pass a law to stop the behavior.  You are correct that the more unethical business becomes, the more regulation that be put into place.  If businesses do not like the regulations, then act ethically in the first place.

Tip,

I knew you would bring up the Co-op model.  I was going to mention it for you, but thought I would give you the honors.

Riley,

That is the reason it is easier for politicians to act unethically then businesses.  Customers do have a more immediate response and if politicians engage in unethical behavior there is no one but the source of the problem to regulate the behavior, which obviously is not going to happen.

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