The Only Way Is Ethics

“Predators are just interested in the fast buck, taking what they can out of the business…..It's about different ways of doing business, ways that the rules of our economy can favour or discourage.

Look at what a private equity firm did to the Southern Cross ….They may not have sold their own grandmothers for a fast buck. But they certainly sold yours. They aren't the values of British business.”

Ed Milliband, Labour Party Conference Speech 2011

In June 2011 my partner and I established Denstone Real Estate Advisors. We resolved that we did not want to work with people who did not share our values and we committed to donate 10% of all our profits to charities. This may cost us money, but it is how we want to do business.  If we did this 20 years ago, we would have been seen as radical, but for many of today’s business leaders, the move to integrate our values into our businesses is increasingly important.

Flashback to mid-1990s when we were looking at possible careers. It was clear that those in business made money, whilst those who looked at the charitable sector for a career were tree-huggers and do-gooders.

Indeed, there was a real perception that the majority of all those going through business and management degrees were the type who had pin-stripe suits, mobile phones and a photo of Margaret Thatcher on the wall. Those who chased the MBA designation were the real city slickers, the Gordon Gekko, super-focused type, who from the age of 18 were determined to make partner in their bank, consultancy firm or law firm and destroy all in their path.

As a current MBA and looking back from 2011 with clear hindsight, one of the real achievements of the 90s and 00s is seeing how many people with strong social and ethical responsibilities entered the business world.

In understanding why this shift took place, look back to the 80s. The paradigms of left and right were simple, definable and understood. Today we look at the globalised 21st Century and we have moved full circle, as western nations overtly court Communist China and the prevalent political philosophy can be described as liberal pluralism, where there is no right answer to all problems. How morality is viewed in the global business economy is no different than in all other all aspects of life; it is highly individual.

Look at Fortune 500 companies and we see cases when businesses transcend their core purpose and seek to address global problems as an acknowledgement of their moral obligations. There is evidence of localised programs benefitting workforces in developing countries, where software publishers seek the eradication of disease and mining companies are the regional experts in building hospitals. Closer to home in the UK, we see projects launched to reinvest in the local communities or to develop a sustainability agenda. There are also businesses that contribute nothing tangible, many of whom are household names.

In addition to keeping Mr Miliband happy, the PR people tell companies that engaging with wider society is increasingly good for business. This is seen in the case of Fairtrade, ethical banking and carbon offsetting, proving that an ethical differentiator is a key marketing and sales attribute, and that values based promotion, which generates an emotional response, is the holy grail of marketing.

However, before we declare this the age of “cuddly capitalism”, or commend the UK for being at the forefront of “ethical entrepreneurship”, after 18 months of my MBA I remain a cynic of much of the movement towards corporate ethics.

This year, I was introduced to a new development in ethics and morality, the “off the shelf ethical packages” sold by consultancies like PWC. Yes, for a small fee (actually, probably a large fee) you too can have your very own corporate and social policy, with sound environmental credentials, carbon offsetting, anti-discrimination policies and a full progressive platform to make the most left-wing Labour leader think you should be awarded with that hard-earned peerage.

I spent some time working with an unnamed company earlier this year, which are classic asset strippers, vulture investors and market manipulators. But they take great pride in sponsoring schools and have fantastic community engagement and youth empowerment programmes. I do not doubt that the intentions of the charitable staff are genuine, nor are there any questions of the morals of the principal benefactor, but seeing the company operate from close quarters, their attitude towards business contains zero ethics or morals; as the CEO would say, business is business, charity is charity.

When Ed Miliband cites the “values” of British business, I am not sure what he means. British business exists in a pluralistic market, which the capitalist framework favours, within which businesses should be allowed to operate how they want. For some, the only purpose of entering business is to obtain maximum profit on investment and the ends justify the means. Is this un-British? Is buying in an ethical package to appease shareholders, the British way? Or is the patrician approach, demonstrated by the Lever Brother in Port Sunlight and Robert Owen in New Lanark, more like Milibands’s British way?

I strongly believe that businesses don’t have ethics, people do.

Ethics and morality are personal issues; the values with we choose to lead our life and decisions we make are ours alone. We live in a society where the individual is free to take a job, form a career, and consume as he sees fit. In my own circle, I see personal and business value alignment as being more pronounced than ever and it is routine to see people not applying for jobs or with companies where there is not a value-fit, even in these trying times.

If businesses want to cultivate an ethical core, they must alter their organisational culture, they must recruit away from “the usual subjects” and look outside the box to integrate good practices.

But not all businesses want to. If they are contributing to the economy, paying their taxes and are happy the way that they are, why should they change?

The proposal to use the state to formalise the alignment between business and morality by using the carrot of peerages and with the force of government as the stick, is ill conceived, and will not lead to better people in business, rather, it will lead to the proliferation of suppliers selling “morality out of a box” rather than better business ethics. 

For me, the only way is ethics. If you want to understand the values of a business, look at the people, not just the policies. We developed Denstone because of who we are and how we want our business to be run. In business, like life, I will not impose my beliefs on others- but if I don’t like them, I just won’t work with them!

Oliver Lovat is a current Executive MBA Student, Chartered Surveyor and Partner of Denstone Real Estate Advisors. He began his career working in the Third Sector as Policy Director of the Stone Ashdown Trust, before moving to real estate investment in 2001.