Two popular theories on why corporations fall the ethics test should be debunked, Jeremy Moon says. The explanation in some quarters, that many senior business leaders are ‘corporate psychopaths’, overstates the problem; while former US president George W. Bush’s argument in the wake of the Enron collapse, that there are just a few bad apples, is too lenient. Moon draws on his recent research examining the global financial crisis to suggest four reasons for why corporations behave badly. First, there is poor alignment between the way markets function and the ethical expectations of the public. While consumers believe companies should behave appropriately, they also demand cheap goods. Moon cites the April collapse of a shoddy Bangladeshi clothing factory — in which more than 1000 people died while producing garments for Western retailers — as a symbol of the conundrum. ‘Part of the ethics failure is that consumers want cheap clothes, while companies which sell cheap [goods] tend to do very well,’ Moon says. Second, some leaders fail to step up to the mark ethically. ‘It’s not a question of bad apples — it’s about ethical leadership.’

Third, Moon says there has been a failure of ‘professionalisation’ on two fronts. Employee handbooks on ethics are left sitting in drawers and professional development programs often ignore the topic, while the appointment of well-meaning corporate social responsibility (CSR) managers has not always translated into better ethical outcomes. Moon says they need to be brought into the business rather than being placed ‘in the room at the end of the corridor’. Fourth, regulatory regimes have not always delivered ethical outcomes. For example, companies have been able to legally but perversely report taxes in a foreign country that is used simply as a place to store money for tax advantages. Moon concedes regulation of organisations in a global tax environment is complicated. ‘But regulations need to be more effective,’ he says. On a positive note, Moon believes CSR is increasingly seen as an investment, not just an expenditure. He agrees business schools have an important role to play in developing the next generation of ethical leaders, but notes that young graduates can be quickly ‘resocialised’ when they experience the reality of the workforce. ‘It’s hard to have an enduring effect, but it’s a challenge which we shouldn’t shirk,’ he says.

Source: Moon, J 2013, ‘Why don’t corporations behave ethically’, InTheBlack, 3 October.

Required

A. Describe two theories explaining why corporations fail the ethics test.

B. Identify Moon’s four reasons why corporations behave badly.

C. The article provides examples to illustrate each of the four reasons. Provide your own examples to illustrate each of the reasons.