The slippery slope of situational ethics

Greg Unruh

TEXT OF INTERVIEW

Kai Ryssdal: Down deep in the Goldman Sachs website should you care to go poking around is the company's code of business conduct and ethics. Goldman pledges to conduct itself in accordance with "the highest ethical standards." Unless, it doesn't want to. The last article on the last page of that document says the firm may waive certain provisions of this code. Kind of like keeping its fingers crossed behind its back. This kind of document is actually pretty common across corporate America as is that waiver sentence.

Greg Unruh is the director of the Lincoln Center for Ethics at the Thunderbird School of Global Management. Greg, it's good to have you with us.

Greg Unruh: It's a pleasure, good to be here.

Ryssdal: First thing that came to my mind when I saw this story was situational ethics, which seems to be kind of a slippery slope.

Unruh: It certainly is. I think what they're trying to create here is a code of ethics safety valve. I mean, the code of ethics are designed to limit manager's options to only ethical behaviors. And of course, companies don't like to miss out on profits, so the safety valve is allowing them to sacrifice their ethics if the price is right. It's just a bad idea.

Ryssdal: You know, Goldman says it has never exercised this waiver. Does that really matter? I mean, it's on the books.

Unruh: I think it's a mistake to have it there in the first place. Any code of corporate ethics is just words on paper. And it only gains power when it becomes embodied in the corporate culture and in the executive behavior and the values of the company. And clauses like this say our values are for sale, and that sends a powerful message that sort of negates the cultural impact of a code of conduct.

Ryssdal: Rising once more to Goldman's defense, Sarbanes-Oxley -- the financial reform bill that came in after Enron -- said listen, everybody's got to have a code of ethics, and Goldman says, "You know what? Everybody's got this waiver in there. Everybody's doing it, so, gee mom, why can't I?"

Unruh: Well, it's interesting. I don't know the full history of how the legislation was written, but I expect that that clause allowing that waiver is in there because a lot of corporations lobbied heavily to have it in there. So, it's curious they can point to a clause that probably companies have a lot of impact getting into the legislation as the defense for putting those clauses into their own code of ethics.

Ryssdal: My guess would be, it's not the traders on the floor at Goldman Sachs who drafted this thing, it's some lawyer in the general counsel's office, and what he has effectively done is give the business money-making part of that company some cover.

Unruh: That's right. You know, the code of ethics was really a creature of legislation. Companies put those in place, because the court said that if they had them, and an ethical transgression occurred, then they would get a less sentence. If they didn't have a code of conduct in place, the book would thrown at them. So this really is a creature of the corporate counsel's office.

Ryssdal: Greg Unruh, director of the Lincoln Center for Ethics at the Thunderbird School of Global Management out in Arizona. Greg, thanks a lot.

Unruh: My pleasure.

Ryssdal: And if you're curious what the most commonly used words are in Goldman's code of ethics, we'll give you a hint: It ain't "ethics." See the word map we created.

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