Ted Malloch: Interviewed on the Future of Business in Free Markets
Guest post by Ted Malloch
Recently, Strata Leadership had the rare opportunity to speak with Dr. Ted Malloch, previously of Yale and Oxford University, Chairman and CEO of The Global Fiduciary Governance, LLC, a strategy and thought leadership company. Dr. Malloch shared his thoughts and insight regarding the future of business and the importance of trust.
His book, The End of Ethics and the Way Back was the topic of consideration. In a day when many students are attracted to socialism we thought it valuable to discuss the morality of the free market.
1.What are business ethics and why are they important?
Ethics are the codes and rules that allow businesses to perform in a capital-intensive economy. Don’t lie, don’t cheat, don’t steal, are all-important to support the rule of law and to conduct business as we know it. I don’t believe that ethics are different for businesses than they are for human beings. There is only one set of ethics that encompasses how we do business and how we live our lives. Good business in a market economy is ethical. Capitalism is moral.
2. In your book The End of Ethics and the Way Back, you discuss how virtue and trust are constantly eroding in our society. Why does this matter?
If you go back centuries, Christians in particular had the eight temptations that were eventually codified into the seven deadly sins by the church – pride, envy, gluttony, lust, wrath, sloth, and greed.
If you fast-forward to today, we have a post-modern vocabulary and no longer are keenly aware of the seven deadly vices — so we lack the urgency to maintain that standard set by history. We are aware that some things seem wrong to us – people do seem to see something slightly wrong with fraud, Ponzi schemes, and other business malfeasance – but we can’t put our finger on why.
Recent surveys at even the top Ivy League schools indicate that students, even at an early age, do not mind a “little” lying or a “little” stealing in order to get ahead.
This attitude of acceptance of “little” ethical lapses is having the biggest impact on Wall Street, and the global economy since the Great Depression.
We need to regain a kind of ‘humane economy’ – one built on interpersonal and corporate trust and honesty – in order for the market to function. Right now, trust is at an all-time low. Less than 15% of people trust any level of authority, whether that is lawyers, politicians, CEOs, or representatives of their own religious faith. We have destroyed the trust that is our moral fiber; we need to get it back. Restoring honesty is what we call “the way back.”.
3.You mentioned that students today don’t mind “a little bit of lying” or “a little bit of stealing” if that is what it takes to get ahead. What happens when these students enter the workforce?
These students, like many of the rest of us, have formed all the wrong habits. New employees will bring these issues into the workplace causing them to underperform or get involved in transgressions, even crimes.
This sort of outcome is not relegated to entry-level positions. It can happen at the top of the organization as well. It used to be said that there were just a few ‘rotten apples’. Now some would say there are systemic rotten apples, which eventually corrupt the organization and degenerate our entire capitalistic economy. Firms have lost their sense of judgment and therefore have lost their way. The landscape of our society has changed – students, sports, companies, employees all need to set their direction so as not to be lost –without a rudder or moral compass.
Even if individuals still have a sense of right and wrong, often-diseased corporate cultures can wash over them, leading to their demise. Companies lose valuable capital, suffer staffing issues, and damage their growth potential and reputation. Unethical behavior eventually catches up to you and drastically impacts downstream, affecting the entire value chain. For sporting examples, look at doping in cycling and baseball – unethical behavior garnering short-term gains at the cost of careers and sometimes even lives.
4. Can you give us some slight hope for the future?
That’s what we do in the back part of the book. We ask ourselves how do we get out of this bind and restore ethics to market economies. We identify solutions to the problem – we provide a roadmap and even a Governance Audit tool.
We need to restore such virtues in order to have continued economic growth. The market is required to have ethics, not just compliance in order to flourish.
There are four levels of ethical restoration we delve into:
- The person – becoming people of character.
- People in culture, corporate cultures – building a culture of integrity in the organization.
- Need for companies to form industry clusters to care about their industry reputations. Together they can support high standards and put in place a means to police behavior.
- New regulatory frameworks – government intervention, which is a last not a first resort. It is the last resort and should be simple and cost effective</li
5. How can leaders encourage ethical behavior?
The goal, the true target is to rebuild the bridge of economic vitality, develop investor trust, and focus on ethical awareness within the company. Leaders should always model good behavior as the “tone at the top” sets expectations throughout any organization.
Here are three ideas to transform your organization:
- Ethical governance audits. Companies should get into the habit of looking at what they are doing and how they are doing it. It is like a test that the company takes to measure their performance and enterprise risk management.
- Sound regimen. Like physical exercise, the organization needs ethical fitness and training to build up the DNA of integrity within the organization.
- Constant engagement. If you stop exercising you get flabby. The same is true with organizations. If you stop growing in stature, bad results return. It’s a journey that is never finished.
6. How can each of us help build a more trusted society under free market capitalism?
I think the same process can be done on a personal level and an institutional one.
Families should have these types of discussions and ask themselves, “Where are we getting our values?” “What are we doing with our leisure time?” “What are we doing with our charitable dollars?”
At the societal level communities, states and nations need to ask similar questions.
Ethics isn’t just a dot – it is all the dots connected.
Ted Malloch is the co-author of End of Ethics