Upon receiving a copy of my book, How to Be Profitable and Moral, one CEO said: “I don’t want to be moral!” He was only half-joking, implying that being moral is a losing proposition. His view is shared by many businesspeople: morality is idealistic, impractical theory that does not recognize the real-life dilemmas of business. The reality of business is harsh, competition is relentless, and you cannot afford to uphold moral principles, they argue. To survive, to be profitable—to achieve your self-interest—you got to do what is practical, they claim. Sometimes that requires exploiting others; just make sure that you will not get caught, they advise.
Consider this dilemma of a company CEO and majority shareholder. His company has been developing a new product for a major customer to replace older, near-obsolete products. If the product is not shipped out soon, serious cash flow problems will jeopardize the company’s survival and 300 employees’ jobs. When the first batch is about to be delivered, the final quality control reveals a problem: the product does not meet all of the customer’s specifications. What should the CEO do? Saving his company may require deceiving the customer but is clearly in his and his employees’ self-interest. It would be the practical thing to do, he reasons. Yet, morality requires him to be honest. There seems to be a conflict between what is practical and moral.
But the CEO’s conflict is not real. What is moral is also practical. Let’s assume that the CEO in chooses what he thinks is the practical, albeit immoral, way out of his dilemma. That would entail various dishonest actions, such as shipping the product even when it does not meet the specifications, and possibly falsifying the company’s financial statements to get another loan from the bank. Achieving that would also require lying to the customer, to the bank, to the company accountants, to and to the shareholders.
If the CEO is lucky, nobody will notice, he gets away with dishonesty and concludes that choosing the immoral path was indeed practical. But this conclusion is mistaken. The fact he may get caught is not the main point in arguing that acting morally is the practical choice. Immoral action is impractical because it is destructive, not only to the CEO’s victims whom he defrauds: the customer and the bank, but also to himself.
There are all kinds of destructive consequences of his immoral action whether he gets caught or not. Upon finding out, the customer could end its relationship with this supplier, sue it, and let the rest of the industry know. If the bank finds out, it will pull the loan and most likely all previous loans as well and let other banks know, making it much harder for the company to obtain debt financing. Similarly, the company’s accountants would likely quit; and if they didn’t and went along with the scheme, how could be trusted in the future?
The CEO could avoid all of the above if he does not get caught. However, his immoral action would still be destructive, and therefore impractical. The customer and the bank would be harmed, as would be the shareholders who could have preferred a different investment had they not been deceived. However, the CEO’s immoral action is also destructive to himself, even if he gets away with it in this particular case. He might have saved his business for now; however, his immoral action has a destructive impact on his mind—his main tool of survival.
Once the CEO has acted immorally (defrauded the customer and deceived the bank), he must cover his tracks so as not to get caught. This requires further dishonesty and significant mental effort, as he has to keep straight in his mind what lies he has told to which people—a difficult task, as he is dealing with lies and therefore cannot simply check the facts. Even if the possibility of slipping and getting caught does not worry him, he is firmly headed down the path of self-destruction. His mind’s focus necessarily shifts away from dealing with reality—which the success of his business demands—to deceiving and exploiting others: customers, bank, employees, shareholders—on whose successful functioning his own success depends.
The only practical solution to the CEO’s dilemma is honesty to the customer and to the bank. The moral is the practical—that is the reason why you want to be moral.