JLE: You have been involved in the ethics around business and corporations for a long time.... how do you see the field changing? Have the issues changed, have approaches changed, have priorities changed?
BH: I see this question as a call for the history of the development of business ethics. The field of business ethics is evolving. It has tended to be dynamic, but in spurts. Business ethics has been changing and changing, mostly for the better. Some corporations had the equivalent of an ethics standard from the very beginning. Dr. Merck had a standard from the very beginning and the Merck CEOs to this day hold to it proudly: "We don't aim to make money, we aim to make good medicine."
Historically, there were a few other corporations run by someone akin to Dr. Merck, but not many. Generally the standards were personalized-they depended on the CEO. But every so often we'd hit a bad stretch with corporate scandals, or something would go wrong with the stock market that needed correcting, and usually the government would respond. They'd be helped often times by "civic do-gooders" who were pushing along the same lines. Consider what Teddy Roosevelt did, in beginning to split up the first big corporate monopolies.
There was another spurt of reform in the second Roosevelt administration as FDR worked to find ways to improve the economy and recover from the Depression. The government exerted pressure on corporations change some of their practices-in particular the government was trying to prevent mergers that created monopolies.
After World War II came the wave of civil rights laws, generated by and large by the civic groups and the general public. In those areas the corporations lagged, which was one of the reasons people thought they needed the laws. I must say I think corporations by and large did a good job, once they understood the need, in complying. Virtually all major corporations complied with the laws.
That's where we began to get an interesting development. Some wise corporations began to extend their own ethics standards beyond the law. These corporations wanted a code of ethics that was broader and covered more people. They were encouraged by research in universities and by civic groups. A lot of the impetus came from the CEO and the board itself saying "Things are changing and we need to do a little more." Once in a while it happened because there was a scandal and the executives thought "Boy, I don't want that to happen again." That kind of kick in the shin helped them go beyond compliance.
By now professors were developing various ways of putting organizational ethics into an intellectual framework. I think they deserve a lot of credit. Then along came globalization. It took a while, but one corporation after another went global. The average multinational corporation had assumed they could use the regular code of ethics they'd had for 10 or 20 years. However, before long they began to realize it didn't fit all that well. One way or another they recognized a need to adapt ethics standards for their overseas operations to adjust to those other cultures. Typically a CEO wanted to keep overall control of the firm's ethical behavior, but adapt specific regional or local standards. One multinational firm after another devised adapted ethics programs.
This is another reason to think of corporate ethics as dynamic. They changed slowly and bumpily in the global area, but they did change. Now the corporate ethics structure pays attention to complaints, environment, the nature of doing business overseas, and other subtleties.
While all this evolution went on, core values stayed. I see three values that have been there from when humans first began to transact business:
To be fair to customers
To be honest in transactions
To be respectful of others (companies use different words here)
Those three values are still represented in corporate ethics. You can find parts of them in Plato, Aristotle, and a number of places in the Bible. They are the root of a code of ethics which has continued to be expressed in each of the evolutions of corporate ethical programs.
I think it's useful to see that corporate ethics go back quite a while and yet can adapt to change.
JLE: How would you say the faith community has influenced the business sector around governance issues? What are the tools that the faith community can use to contribute to business ethics?
BH: That's your most pointed question, and it's a very good one. I think the kinds of values we were just discussing have percolated into many business executives who eventually rose high enough to shape the ethics program of a company. "Do unto others" is a practical kind of way of describing how these ethical values push people to deal with each other. I think it has been very helpful. I think the parable of the Good Samaritan tends to stick in peoples' minds as they grow up. They are nudged by civic causes and civic groups which often have a degree of influence. Some of that influence is found in the faith community. But I think much of the faith community's influence comes in the religious education that the current corporate executives received growing up.
What are the tools the faith community can use? Now you come to where the rubber meets the road. There's prayer. There are also two practical tools that can make quite a difference. One is good old plain dialogue. It means going to talk to the appropriate officer and complaining that something they're doing seems to be outside of the standards. We've done that to get better rights for many different groups. It may not feel like it has an effect at the time, but it does. I had the ethics officer of a major corporation say "look, when 5% of our customers start pushing on us, we listen. It doesn't take 25 or 50 or 74 percent. When it's 5% we start to listen."
In addition, the faith community has a lot of connections with foundations and funds that hold corporate stock. If you can get the ownership or the trust to give you permission to vote the proxy of those stocks, and you can build up about 2,000 of them all voting yes on the same stock resolution, the SEC regulations say the company has to let you put it on the agenda for the next annual meeting. Those resolutions have a real effect. You're there in the boardroom making the case for the kind of change a corporation should make. It's a very practical, pointed way a faith group can have an effect.
Are there some areas where the faith community and the business community might be using different language and different concepts? How would you reconcile the faith and business communities in those areas?
The answer to that is yes. We find that one tends to speak idealistically, and one tends to speak realistically. There are a lot of faith groups coming to corporations with proposals that are more idealistic than realistic. They have their reasons, but when they are talking in idealistic terms, and when the corporation is talking in realistic terms they experience difficulty communicating.
It goes the other way too. Corporations tend to be more short -sighted than is appropriate or effective for the subject the faith community is discussing. The corporation tends to want to snap off quick and easy responses to long-term problems.
Those different ways of thinking are at the root of a lot of misunderstanding.
JLE: Where do you see points of contact with faith communities?
BH: There are two main points of contact-dialogue with the executive of company or--even more effectively-getting enough proxy votes to get on the corporation's agenda. These techniques may not make you well-liked, but they will get you attention.
What I don't see in many corporations is a very smooth relationship between the faith community and the executives of the company. I can see places where civic leaders have worked out a smooth relationship with executives of company. I can hardly think of one example where the faith community has been able to do that. Some civic community groups have gotten pretty good at building a bridge to companies. Faith communities have not been as quick or insightful at coming in with the attitude "I'm going to bring an idea that will help the company, or at least it won't be something that hurts."
If you can't think of a proposal in a way to help the company as well as society, my advice is think harder until you think of a way that can help. It makes a big difference when you go in and say "I think if you look at our proposal in the medium and long term, there is benefit for the company."
Corporations and faith communities live in worlds that are different. Usually each of them doesn't realize that building the bridge to the other would be beneficial. Very often what faith groups ask for is a one-sided action. They tend to come in with one proposal. Building a bridge between the corporate executive world and the faith world takes a consideration of the needs and goals of both sides.
That's a role I've played in retirement through Wharton. Building bridges.
JLE: What kind of role do you think the government plays in governing corporate ethics? Do you see a basis for the way you think about this in your faith?
BH: I'm a big free market fan. I'm an economist trained to believe the free market works pretty darned well. But it's not perfect. Clearly there are times when the market fails to meet some need of some part of society, and that's when we call on the government. I think that's a good role for the government to play. I just hope they don't overdo it. I do think that with proper involvement, governments time and again have pushed reluctant corporations to do something that turns out to be better for the corporation as well as society.
Yes, I see a basis in faith. I think I often see it afterwards. I got started on the basis of a religious structure. I like the idea of being fair and honest and respectful of the other person, and so I've always tried to do it.
JLE: How do you see you own life with many facets; government (Federal reserve), education (Wharton) and research, being influenced by your faith/ your "call"?
BH: I've had that feeling in my years working at the Fed, and the Committee for Economic Development and in my years of working at Wharton. Every so often an opportunity tugs me in a different direction. I look back and see how deft the adjustment to my direction was, and I feel some hand other mine steered me into it.
I think of myself as coaxed more than called.
I don't think of myself very often getting something you would describe as a "call." But I do think of myself as getting "out of the blue" numerous opportunities or openings. I feel like I'm being coaxed into them. Five or ten years later I look back and say "Boy, the good Lord put me in the right spot."
JLE: Can you describe your work on the Conference Board around corporate ethics? Do you think there is a sort of cultural climate in which corporate ethics are formed and adhered to? How does a church influence that climate?
BH: For some years I worked closely with the Conference Board. I think it does a very good job of describing the current status of a problem or development in the corporate world. They work hard to get it right, they use techniques to try to hold down biases. They are very professional in developing information that will allow them to describe what's happening.
Researchers on my end are waiting to do the analysis of their results. We're economists and professors trying to make sense out of data. We work on analyses of developments and implementations that might come from the situation the Conference Board survey reveals. I thought it was nice complementary arrangement. It served academics well because it gave us a free, open way to use that knowledge.
I think religious education of executives is the main way that religious teaching works its way into the climate of corporate decision making. There are occasional brilliant religious breakthroughs. Billy Graham can blow over a CEO. But that's rare. Most CEOs know they have to make decisions. That means there are always different choices. They build up to a decision. The slow evolution of their religious values bears on what they're doing in their company.