[.uk] Profit with Honor: The New Stage of Market Capitalism ... (ISBN 0300108583)

Should Be In Every Boardroom:
This book is about ethics and integrity in corporate America. The author discusses the various scandals of the past decade or so, looks at root causes, and proposes a solution. This book could easily have been a statist prescription for yet more regulation by that whacko entity we call the federal government (which doesn't actually govern), but fortunately it was not. Just as easily, it could have been yet another book used by the author to push the leftist agenda in the rosiest of terms, despite the fact that agenda has always failed and always will. Fortunately, we were spared that reality-challenged view as well. Nor is it another effort to push the "conservative" agenda (basically, a way of diverting money to special interests). In fact, Yankelovich stresses the need to move beyond political "solutions" to problems. People change careers, and I am one of those people. In my former life as an engineer (in a galaxy far, far away or something to that effect), one of the skills I learned was root cause analysis. This kind of analysis is demonstrably absent in public policy, as is evident from the demonstrable failure of federal policies, federal agencies, federal programs, and just about anything else spewing forth from Washington, DC. I notice that most "experts" have pretty logical-sounding solutions to what ails us, but almost none of them first determines what problem needs solving. They have a hammer (their area of expertise), and the whole world is their nail. Yankelovich takes a humbler and more rational approach. This book talks about what CEOs and other leaders should do to restore integrity in our corporations, yet in the preface he says he's neither a celebrated CEO nor an expert on the subject. Upon reading the book, I found this worked to his advantage. He's not an armchair general type, either, though. He was on many boards over many years and has seen the workings of the inner sanctum firsthand. His background as a social scientist and researcher is also a critical qualification, because he has an excellent lens through which to observe and analyze. At 169 pages in paperback format, this book is short. It's not a highly detailed academic treatise on case histories. Yankelovich is certainly capable of producing such an opus. But it would be read by academics rather than CEOs. This book is the perfect size for its primary target audience--the high level corporate executive. It can fit into a briefcase for reading during a return flight or two. Profit with Honor has ten chapters. The first two give us a clear picture of the problem. In those chapters, Yankelovich also discusses why legal remedies don't work. For example, if you have a law barring a certain behavior, people who believe it's OK to game the system will find and exploit a loophole. To see how this pans out, look no further than our insane, and counterproductive, federal income tax code. He also talks about what happens when a company promises to play nice and then doesn't. The next two chapters explain why "What's good for GM is good for America" isn't so (not to pick on GM--that was the actual statement, but the sentiment was quickly adopted by other companies). Yankelovich also provides comparisons between the ethics of today (or lack thereof) to the ethics of previous times. This isn't a "sure was great in the good old days" fantasy. Yankelovich bases his analysis on actual research, including a study of the Harvard Business School Class of 1949. What he has to say about "civil society" in Chapter Five is right on target, and should be required reading for everyone over the age of six. Unfortunately, we have too few adults with the proper training in civility, and we gag on that aftertaste of that every day. Chapter Six and Chapter Seven provide a good discussion of stewardship ethics, which Yankelovich proposes as the means of getting our corporations back on track. In Chapter Eight, Yankelovich exposes the fallacy of the "Shareholder Value" philosophy, leaving no doubt for the reader that it has proven to be costly and destructive. Chapter Nine explores the concept of gatekeeper integrity. Our gatekeepers include institutional investors, auditors, business lawyers, investment bankers, business journalists, and educators--and they have profoundly failed us. The final chapter, Titled "Hummer vs. Hybrid" nicely ties the book's concepts together. What better way to make things clear than to use a common example and figuratively turn it over in your hand so that each edge, nook, and cranny is exposed to sunlight? This example concerns the attitudes of two companies. The first one is GM, which I loathe. The second is Toyota, of which I am a customer and a huge fan. GM chased short-term profits by producing gas-guzzling Hummers. Thanks to GM lobbyists, the CONgress (which sells legislation to the highest bidder) introduced more distortions into that abomination called "the federal income tax code" to make it advantageous for people to own Hummers rather than a vehicle that makes sense. Hummers tear up our roads (causing us to pay higher road taxes) and consume four times the fuel that a sensible vehicle does (causing gas prices to be higher). So, we all pay for some insecure person to drive around in a Hummer dominating the road while GM managers soak up their bonuses for short-term profits and Middle East terrorists enjoy the funding provided by the additional oil revenue. All perfectly legal. Toyota, on the other hand, behaved responsibly by producing the fuel-efficient Prius hybrid. It's important to note that this isn't their only fuel-efficient vehicle. My Camry gets nearly 40 MPG on the highway (5-speed manual transmission, good driving habits, synthetic oil, and other things boost its fuel economy past the EPA rating). Some other models of conventially-powered Toyotas, such as the Corolla, do even better. If we replaced every GM vehicle with a Toyota Camry, America would no longer have an energy problem. Toyota's venture into the hybrid market came at the cost of short-term losses. This car isn't a cash cow for them, and it isn't causing their executives to go home with multi-million dollar bonuses. It's part of the their long-term strategy to build cars that serve people and society. It's the result of their "continual improvement" ethic. Yankelovich follows this same ethic in his writing. He isn't proposing a quick fix. He's proposing a change in underlying attitudes and beliefs, and it takes time for those things to produce effects. It's like eating right vs. taking medications. Eating right won't instantly make you healthy, if you are presently not eating right. But it's the only way to be healthy and correcting the effects of wrong behavior takes time. It's also a monumental task to get all the players on board with such a change. If this book makes its way into boardrooms and executive suites across the country, and if individuals in those boardrooms and executive suites decide to make personal integrity a top priority ala the Class of 1949, that change can and will happen. If you like the idea of a nation in which corporations are run in an ethical fashion (providing a model the federal "government" might learn from), read this book and then recommend it to others.

Must Reading For Any Current Or Future CEO And Business Leader:
This is a book I wish I had written. I have talked at length over the past few years about what is wrong with today's capitalist economy and particularly so since the Enron, Tyco, WorldCom, and other corporate scandals. However, I am and always have been a committed supporter of a free-market economy with minimal government interference. In the late 1950s (while very young!) I embraced Ayn Rand's "laissez-faire" theory of business, only to be later disturbed by some of the unwarranted and seriously problematic assumptions one had to make in order to completely buy into her "doctrine" of extreme individualism and "caveat emptor" economics. While I recognized that neither Communism (ala Marx) nor state socialism could bring about a dynamic market economy combined with political liberty, there was, I thought, definitely something missing in the theory and practice of a free-market economy as Rand and her coterie envisioned and promoted it. Moreover, the so-called "mixed economy" (which is what the U.S. pretty much has now -- a mixture of free-market and "socialist" elements) has not prevented the scandals recently experienced. Enter Daniel Yankelovich with his new book "Profit With Honor: The New Stage of Market Capitalism." In my opinion, on the Aristotelian scale of ethical virtue, his book represents the "mean" between the extremes of a dog-eat-dog capitalism with profit as the "only" consideration and the position that profit is evil, private enterprise is antisocial and, therefore, a centrally-planned government-run economy is the only acceptable solution. Economic activity is, of course, not fundamentally different from any other human activity, whether it be individual, social, political, or whatever. There has to be some moral foundation, some ethical framework, which justifies and provides a rational structure for the activity. Neither of the aforementioned extremes can provide the necessary theoretical support nor the practical guidelines for an economic system which must take into consideration human nature and the human condition. In his book, Yankelovich states that his "main argument . . . is that the time has come for market capitalism . . . to advance to a new stage of enlightened self-interest. American business needs to develop a new ethic -- a coherent set of social norms -- both to counteract the forces leading to the scandals and to meet the challenges of the global economy that call upon business to take on many new responsibilities." He calls his program (if that is the appropriate term) a "stewardship ethics," a set of cultural norms for business which involves social responsibility without rejecting the concepts of profit and self-interest. This is, for the most part, my position on the issue. The philosophical enemies of market capitalism have had plenty of ammunition provided to them in recent years by some of those -- dare I say "crooks"? -- who are involved in market capitalism itself. Without a solid and rational moral foundation, market capitalism becomes its own worst enemy. Yankelovich appears to be confronting this challenge and, I think, points the way to a good resolution of the problem. There is no question now, in my view, that capitalism as it has been practiced in the past is just that -- a thing of the past. Capitalism must now advance to the "next stage of evolution," as Yankelovich envisions it. While it is vital that profit-making remain a central concern and goal of any economic enterprise, companies must also give due consideration to customers, employees, and society at large. There is really no essential conflict between making a profit (which any business must do to survive) and social responsibility. This notion of conflicting objectives was, I suspect, a matter of philosophical immaturity during the developmental growth of the capitalist system. It should be recalled that many of the so-called "robber barons" of the past did participate in philanthropic activities and contribute generously to the "social good." (Think Carnegie libraries, Ford and Rockefeller foundations.) But, of course, the problem remains regarding the future of market capitalism, especially amid all the recent scandals. This is where I think Yankelovich makes his most noteworthy contribution. Abstract principles of ethics -- which is what many of us were primarily concerned with when I taught classes in ethical theory in years past -- is one thing. Important as that is, however, the application of ethical principles to practical situations, institutions, and social realities is, after all, of immediate concern. What Yankelovich provides is an extension of rational ethical principles into the marketplace, that is, where the action is and where they are most useful. There is no justification now for schools of business and departments of economics to ignore the moral and social ramifications of market activities; courses in business ethics, and I suggest maybe the "stewardship ethics" recommended in this book, ought to be a core part of the curriculum -- not just an elective, but a requirement. "Profit With Honor" is, of course, not a full-blown treatise on business ethics. It is a short book, a mere 169 pages of actual text. It is, however, concise and to the point. Yankelovich's suggestion that market capitalism should adopt the idea of "doing well by doing good" comes across throughout the book and this idea needs to be internalized by anyone considering a future in business leadership. He concludes: "In our culture . . . the transformation to stewardship ethics may take place without even being widely noticed. But its effects will register in enhanced trust in the business sector, in improved long-term profitability, and in significant advances in global well-being." One can only hope what he says proves prophetic. This book is an excellent introduction to the problem at hand and, for many of us I suspect, a framework within which the practical solution to the problem can be realized. Must reading for any contemporary or future CEO. Highly recommended.

Lots of Stimulating Thought in a Small Book:
Daniel Yankelovich is a social scientist who has also served on several corporate boards. That gives him a unique perspective on the ethical challenges that face board members. Yankelovich, to use his term, is a "privileged witness," who sees business from the outside, but has seen its inner workings up close. Even more important in some ways is the fact that he and his company have been among the firms tracking changes in society over several decades. Here is why he wrote this book: "The purpose of this short book is to suggest that the business community can turn the scandals of recent years to good use, both for business itself and for the larger society." Yankelovich sees three causes for these scandals. They are: 1) deregulation; 2) linking the biggest part of CEO compensation to stock price; and, 3) the importing of wider social norms into business, resulting in what he calls "unenlightened self-interest." In the first half of the book he outlines changes in social norms in both business in society over several decades. Business, according to Yankelovich is more likely establish the norms he desires than society as a whole. And, he thinks, if business does so it will "help dispel moral confusion in the culture at large." He says: "My main argument in the book is that the time has come for market capitalism in the United States to advance to a new stage of enlightened self-interest." To do that he advocates something he calls "Stewardship Ethics," which he defines as "commitment to care for one's institution and those it serves in a manner that responds to a higher level of expectations." He devotes the second half of the book to describing what a set of norms based on "stewardship ethics" might look like and how they might come about. In one of the most helpful sections of the book, Yankelovich spends time outlining the difference between his Stewardship Ethics and the bundle of beliefs and positions that come under the heading of "Corporate Social Responsibility." If you're like me, you'll find Yankelovich's position a refreshing change from the "profit is evil" approach of most CSR types. If you are someone who sees the pursuit of profit by companies as, at best, a necessary evil, you will be very uncomfortable with this book and its ideas. This book has two key strengths. First, Yankelovich himself is both knowledgeable and logical. Second, the book is short, only around 170 pages of text. Those are also the book's weaknesses. Because Yankelovich himself is knowledgeable, he often leaves terms undefined. I could not find a definition, for example, of one of his key terms, "market capitalism." It may be that everyone indeed defines that term the same way, but I doubt it. The shortness of the book means that some arguments are made without adequate support. For example, on page 96, Yankelovich says, "How well a company conceives and executes stewardship ethics as a community has a direct bearing on its long term profitability." He then offers the example of Wegman's as proof. Alas, a single example without supporting evidence is not proof. This brings us to the key question: "Should you buy and read this book?" If you are a senior executive, a member of a corporate board, or a faculty member at a business school, this should be on your "must-read" list. Yankelovich has crammed a lot of good stuff and cogent analysis in here about the business climate and corporate responses. This book is also a good read if you're interested in the ethical challenges of contemporary business, but you don't make it your primary focus. If you're a professional ethicist or philosopher, you'll find the book a little light on both reasoning and support, but that's exactly why it's a good read for the rest of us. The book is filled with provocative ideas and well written. But if you're looking for a "how to" book, this would be a poor choice. It's a great book for stimulating thought and discussion, but the "how to" will be up to you.