ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, May 5, 1996 TAG: 9605030088
SECTION: BUSINESS PAGE: 1 EDITION: METRO
COLUMN: Ethics
SOURCE: GREG EDWARDS
Was it right for AT&T last year to pay Chairman Robert Allen $5.2 million plus stock options worth a potential $11 million at the same time he was announcing elimination of 40,000 of the communication company's jobs?
A Virginia Military Institute cadet put that question to an alumnus who spoke during a seminar on business ethics at the school late last month.
The speaker acknowledged that executive compensation, in general, is very high and that AT&T didn't handle the issue of job cuts very well.
But, said Thomas Saunders III, a New York-based financier and Isle of Wight County native, the company had no other choice than to cut its work force if it is to survive competitively.
Sure, companies have obligations to shareholders, to employees and to communities, Saunders said. But, if they don't survive, they can't meet any of those obligations, he added.
AT&T's was not a moral problem, Saunders said, but it clearly was a political one.
Some have suggested, not entirely tongue-in-cheek, that putting business and ethics on the same forum is like trying to mix oil and water.
USA Today last month noted that many of the villains in today's network television dramas are business executives, citing as examples such fictional characters as Fox TV's Jim Profit and Richard Cross of ABC's recently concluded "Murder One." The newspaper quoted Alan Merten, dean of Cornell University's graduate school of management as saying real-world executives should take TV portrayals as a warning about how their behavior is viewed by Americans.
However, Saunders and other successful VMI alumni speaking at a business ethics seminar suggested that proper ethical behavior lies at the heart of the American capitalistic system: Without trust built on proper ethics, the system wouldn't work.
Billions of dollars trade every day on Wall Street by word of mouth and a handshake, Saunders said. "Your reputation is everything; if you lose your reputation in that business, you're essentially finished." In his 22 years with Morgan Stanley's corporate finance department, Saunders said he heard of only one incident in which an employee unethically used insider information for his own gain.
When dealing with others, a person can turn a good reputation into profits, Saunders said. If you have the right reputation, you can actually buy a company at a lower price, because of the premium people put on dealing with you, he said.
Ethics is about your own expectations of yourself and not about how the group expects you to behave, Saunders told the cadets. Ethics is about how you live your life and about contracts you make with yourself, he said.
That's not a bad way of looking at ethics, he said, because a person who does what's right just because the group requires it may not treat all groups with equal fairness. Even thieves may have honor among themselves; so it's healthier to have an ethical system in which a person's identity is heavily invested in a socially responsible code of behavior.
As for Saunders' analysis of the situation at AT&T, no matter how unjust it appeared, was it clearly just a matter of politics or public relations as Saunders suggested at VMI?
Lou Hodges, who teaches courses in ethics for aspiring doctors, lawyers and journalists at neighboring Washington and Lee University, said not, when asked later about Saunders' position.
When a man such as AT&T's Allen, who is in a position to negotiate and influence his own pay and benefits, prospers while others within the organization suffer, it becomes an ethical question because the money could well go to others such as employees or stockholders, Hodges said. But Saunders is also right in that the issue is political as well, he said.
"Sure, companies have a responsibility to those people whose lives they affect by their decisions," Hodges said.
And Saunders agreed that companies have obligations to employees and communities and not just stockholders; but companies also must remain competitive and are not in the business of reallocating wealth from stockholders to others, he said.
But must remaining competitive mean laying off workers? Couldn't it mean finding new or more imaginative projects for workers to do for the corporation? And is providing a continuous stream of great, not just sufficient, returns for stockholders - some of whom are company executives, by the way - a better goal than providing long-term stability in society and the economy?
Are those ethical or political questions?
Michael Reagan, president of Tranzact Systems in Chicago, may have the answer.
Writing last year in Traffic World magazine about the growing sacrifice of human relationships for profit in corporate America, Reagan speculated on why companies spend bundles of money on consultants to sell their employees on getting excited about a corporate mission whose goal is to make stockholders more money.
"Why is this sales job necessary?'' Reagan asked. "Because, while most people recognize the need for profit, few believe that they should orient their life around `maximizing' profit. I've yet to see a tombstone that listed as the deceased's great accomplishment: 'He/she made a bunch of money.'''
LENGTH: Medium: 95 linesby CNB