The conference, understandably, had some difficulty in getting to grips with this very wide topic. While the terms of reference went some way to demarcating the area to be covered, each participant no doubt had his or her own ideas about what we were trying to address. It was a pity that we had no participation from Japan; and we could have done with some prepared to reject the free market altogether as a model, even while accepting it as a fact.
That said, we got off to a rousing start with some perceptive and stimulating opening statements in which four background themes (not accepted in their entirety by all) were developed: a world-wide shifting away from active government participation in the economy, with the consequential question of how to prevent the erosion of traditional values in the resulting "free market"; the concept of man as a hunting animal attuned to working in a group and with inherited instincts of social behaviour (a "moral gene"); the breakdown of cultural and ethical cohesion (wide increasing divorce, violence, public disorder, prison populations), due to the rise of the enterprise culture which had brought in its train job mobility and the pursuit of profit to the exclusion of other values, so that selfishness had become a virtue; and finally the need to train managers to meet the problems of business, which were much more complicated than those of childhood or even of private life, with a view to creating, whether by government or peer group regulation, an environment in which right decisions would be taken.
In subsequent discussion, some suggested that the market was not inherently corrupting, that there had not in fact been the lowering of standards of behaviour that was generally assumed - indeed in some instances (e.g. insider trading), standards were higher. Technology, a common scapegoat, had highlighted problems, especially those of differing standards and regulatory regimes in different markets, and enhanced the ability to monitor, but had not created new moral dilemmas. The point was forcibly made that much depended on the establishment in a business of a corporate ethic, which would set out objectives and accepted standards of behaviour. Some asked whether there was not a danger of over-regulation, with the risk that, while rogues would find loopholes, the honest might be led into believing that what was not legal was ipso facto right, especially where competitive pressures were present. (Should a company, it was asked, that was capable of producing an engine cleaner than legally required, but at a cost, risk its market by doing so, or lobby for a tighter law?) Some pointed to a decline in the status of ethics in schools, universities and the home, balanced in particular by the beginnings in the US and UK, but not the FRG or France, of schools of business ethics. Here the possible (and undesirable?) distinction between individual and corporate ethics was noted, as well as a tendency to move towards outside regulation as the focus moved from the individual to the corporation.
These themes were pursued in three groups: one concentrated on what constituted good conduct in business and industry; the second on forms of regulation; and the third on the role of various elements in society in maintaining standards.
In the Sunday's discussions it was, I think, generally agreed that despite appearances there was not and should not be any distinction between individual and corporate standards of behaviour, though the different fields and circumstances in which ethical problems arose and decisions had to be taken produced different conflicts and grey areas and thus different "right" responses. There were no moral absolutes and businesses had to establish a hierarchy of values in which concern not to damage those affected by its activity (i.e. its "neighbours") would be crucial. While the directors of a company must, in a formal sense, be responsible to the shareholders, the concept of "stake-holders" was gaining ground, especially in the US, to include employees (a clear statement to this effect in company law would be desirable), the company's customers and the community at large.
While it was clear that the management of a business rested with the Board of Directors and not in any practical, as opposed to legal, sense with the shareholders (there was little discussion of the position of private companies), it was pointed out that there was an inherent conflict of interest between executive directors and shareholders. For that reason the role of independent directors was particularly important, most arguing that it should not be confined to the oversight of financial management. There was some discussion of two-tier boards, seen as an inevitable development as the European Community worked out its regulations; these were in general to be welcomed, if the flaws in the German system and the representation of particular groups could be avoided.
It was recognised, with some gloom, that the tendency was for more statutory regulation at the expense of self-regulation even though the latter, at least in the eyes of those involved, was more flexible, speedier, less costly and more efficient. In general there was a convergence of the regulatory regimes in the countries represented, though significant differences in the substance and procedure remained. The point was made that in a global financial market, there was a need for an acceptably "level playing field" (a metaphor that kept recurring).
The ethics of speculation, insider trading, takeovers etc, were discussed. If the object of the market was to encourage investment from the general public, it was necessary on utilitarian grounds to ensure so far as possible that the scales were not tipped too far against the lay investor who, perforce, was at a disadvantage compared with the professional. This applied even where a practice might appear to damage nobody, e.g. the so-called victim-less crime of insider trading, though most held that even here there were victims. Disclosure was the key. Speculation was an essential ingredient in any market; taken to excess and in some manifestations it might be undesirable but would be hard to control except through tight rules of disclosure, and perhaps a shifting of the onus of proof on to the predator.
This led to a final animated debate about ethics in general, about the roles of the home, school, the churches, the media and business itself in creating a culture of good conduct, about whether the free market (which all agreed could not be wholly free) and the financial services in particular, did not inevitably produce disparities of wealth and a level of social deprivation ("the underclass") that were ethically unacceptable and moreover bred dangerous revolutionary pressures. Here many argued that the moral justification for a free market, albeit a controlled one, must be that it allowed healthy self-interest to create wealth on a wider scale through entrepreneurial drive, than any other system. Disparities were inevitable and, if the system were abused, would become unacceptable - hence the need, which all accepted, though with some reservations, for regulation; but even at its worst, the system would ensure that those at the lowest level would be better off absolutely than under a command economy, even though relative inequalities might be greater. This position was by no means acceptable to all. Nevertheless it was generally agreed that the free market was not itself the cause of any decline in ethical standards, though its return to favour in the last decade had coincided with such a decline; and that the family, the churches, schools, the media (though the media were largely exonerated from direct blame) and business itself, especially the last, all had a role to play in attempting to re-establish and maintain standards of good behaviour. No one had ever pretended that the task or issues were easy. There was no such thing as a free market: the issue was the extent to which the state should intervene beyond its involvement through taxation, education and training. It was important to get away from the idea that money was the measure of all things: in opinion polls most rated job satisfaction more highly, with social utility second. There was a moral inheritance to preserve and the task was manageable. To the extent that self-regulation worked, the role of the state would be reduced. Management (though this might not apply to small businesses) should work out a corporate ethic. The process, valuable in itself, would ideally lead to a document which would be promulgated and actively promoted. It was important that the whole sector should not be tarred by individual wrong-doers. In the long term the success of a business depended on the integrity of individuals.
This Note reflects the Director’s personal impressions of the conference. No participant is in any way committed to its content or expression.
Conference Chairman: Sir Geoffrey Chandler CBE
Industry Adviser, Royal Society of Arts; Chairman, BBC Consultative Group on Industrial and Business Affairs, and Member, BBC General Advisory Council; President, Association for Management & Business Education
The Lord Bruce-Gardyne
Life Peer (Conservative)
Sir Matthew Farrer KCVO
Private Solicitor to the Queen; Partner in Messrs. Farrer & Co, Solicitors
The Lord Hunt of Tanworth GCB
Chairman: Banque Nationale de Paris pic, Prudential Corporation pic; Director: IBM (UK) Ltd, The Tablet Publishing Co Ltd; Advisory Director, Unilever pic; a Governor and Chairman of the Council of Management, the Ditchley Foundation
Sir Richard Lloyd Bt
Chairman, Hill Samuel & Co Ltd; a Governor, Member of the Council of Management and Chairman of the Finance and General Purposes Committee, the Ditchley Foundation
Mr Alan Lord CB
Deputy Chairman and Chief Executive, Lloyd’s of London
Mr Bryan Magee
Writer and Radio and TV Broadcaster; Hon Senior Research Fellow in History of Ideas, King’s College, London; a Governor and Member of the Council of Management, the Ditchley Foundation
The Rev Professor Jack Mahoney SJ
F D Maurice Professor of Moral and Social Theology, King’s College, University of London; Mercers’ School Memorial Professor of Commerce, Gresham College; Director, King’s College Business Ethics Research Centre
Mr Graham Mather
General Director, The Institute of Economic Affairs
Mr George Nissen CBE
Director, Morgan Grenfell Holdings Ltd; Member Stock Exchange, (Member, Council); Chairman, Gilt-Edged Market Makers Association; Director, The Securities Association
Mr Edgar Palamountain
Director, Esmee Fairbairn Charitable Trust; Chairman: Wider Share Ownership Council, Money Management Council; a Governor, the Ditchley Foundation
Mr Andrew Phillips
Senior Partner, Bates, Wells & Braithwaite, Solicitors
Mr Tony Thomas
Features and Assistant Editor, The Economist
M Claude de Kemoularia
Senior Adviser, Banque de Paris et des Pays Bas
Mr Roger Le Guay
Member, French Stock Exchange, Paris
Mr Wilfried Kratz
London Correspondent (Economic), Die Zeit
Dr Rolf Levedag
Managing Director, Schweizerischer Bankverein Deutschland AG
Dr Meinhard Miegel
Managing Director, Institute for Economic and Social Research, Bonn
M Edmond Israel
Member, Board of Directors, Banque Internationale, Luxembourg, Luxembourg Stock Exchange; Chairman of the Board of Directors, CEDEL SA; Member of the Board and Chairman, Luxembourg Chapter of the British Chamber of Commerce for Belgium and Luxembourg
Dr Peter Rogge
President, Prognos AG; head of corporate development, marketing systems and public relations, Swiss Bank Corporation
Dr Allan C Carlson
President, The Rockford Institute, Illinois
Dr Joanne Ciulla
Senior Fellow in Ethics and Management, The Wharton School of the University of Pennsylvania
Mr Edward H Crane
President and Founder, Cato Institute, Washington DC; Chartered Financial Analyst; writer and broadcaster; Member, Mont Pelerin Society; a Director, Institute for Research on the Economics of Taxation
Mr Robin W Lovin
Associate Professor of Ethics & Society, The Divinity School, University of Chicago
Mr Frank E Loy
President, The German Marshall Fund of the United States, Washington DC
Mr James D Moore
Director, Management Training and Development, Bell South, Atlanta, Georgia
Dr Charles W Powers
Founding Partner, Resources for Responsible Management, Boston
Dr Michael Rion
President, Hartford Seminary
Dr David Schmidt
Director, Trinity Center for Ethics and Corporate Policy
Professor Mark Siegler
Director for Clinical Medical Ethics, University of Chicago
Professor Christina Sommers
Associate Professor of Philosophy, Clark University, Worcester, Massachusetts; author and editor, Vice and Virtue in Everyday Life and Right and Wrong: Basic Reading in Ethics
Professor Lionel Tiger
Professor of Anthropology, Rutgers University; Chairman, Board of Social Scientists, US News and World Report; Treasurer, PEN American Center