arguments: HOW ECONOMIC LANGUAGE AND ASSUMPTIONS UNDERMINE ETHICS: REDISCOVERING HUMAN VALUES

[Paper prepared for and presented at the Inaugural Lecture of the Rafael Escola Chair of Ethics at the School of Engineering of the University of Navarre in San Sebastian, Spain. It is published in Tecnun Journal num. 1 (May 2004). - The recent spate of financial scandals begs for explanation and remediation. Evaluating actions primarily in terms of their consequences, often narrowly defined in terms of efficiency, productivity, or profit, is one source of the problem. And, current conceptions of economics emphasize the importance of outcomes above all and the primacy of outcomes to shareholders in evaluating results. Therefore, a case can be made that it is consequentialist logic and thinking, produced in part by economic language and assumptions, that have helped create the current situation. Remedying the problem will entail exposing students to alternative models of behavior and emphasizing, in both school and organizations, doing the right things, not simply doing things for the presumably right reasons. In following this path of emphasizing values as well as consequences, there is hope for the professionalization of management.]

#102 ::Varios Categoria-Varios: Etica y Antropologia

by Jeffrey Pfeffer, Graduate School of Business at Stanford University, California, U.S.A.
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We have learned a lot in the last several years. We have learned that the use of equity incentives, such as stock options, for CEOs does not ensure that companies will be well managed or that shareholders will benefit from the supposed alignment of their interests with senior executives (e.g., Blasi and Kruse, 2004; Dalton, et al., 2003). On the contrary, many people now believe that options encouraged highly risky behavior and the various corporate scandals that occurred (e.g., Pfeffer, 1998; Morgenson, 2002). We have learned that the unfettered, single-minded pursuit of shareholder value is not necessarily good for companies, their employees, or maybe even for the shareholders (Jacobs, 1991). This lesson, which has both a theoretical and empirical foundation (Aoki, 1988), seems to be repeatedly forgotten. We have learned that CEO tenure is declining (Blumenthal, 2003; Martin, 2000; Radler, 2003), even as CEO pay continues to rise—both absolutely and relative to the pay of others in the organization—and that CEO compensation seems to have only a weak relationship to company performance (e.g., Crystal, 1991; Jensen and Murphy, 1990). We have learned that senior leaders of business organizations, at least in the United States, are now among the least respected people in public opinion surveys (Carroll, 2003), and that the capital markets and business face a crisis of legitimacy that stands in sharp contrast to the situation of a few years ago.