Responsibility, Not Regulation

July 30, 2002 -- In the Business Ethics class I teach, my students ask, “Can a company be profitable and successful and still be moral?”

My answer is always a resounding “Yes!” I explain to them that Enron and MCI Worldcom are exceptions. And they are, despite the seeming rash of such scandals recently.

Business is a fundamentally moral activity. Like medicine, at its core it’s about the things most important to our lives. While the practice of medicine protects our health, business produces the rest of our values. And like medicine, business has its own version of the quack. Kenneth Lay is the business world version of the faith healer.

We don’t need more laws or regulations to keep out the Kenneth Lays and other business quacks. Instead of regulation, we need responsibility.

New regulation and laws make it harder for a business, and its executives, to accept responsibility. The business executive only needs to comply with regulations or laws; he doesn’t need to be truly responsible. If criticized, he can reply that he has not broken any laws. Regulations, instead of responsibility, encourage the attitude that if something isn’t illegal, then it must be alright to do.

Every time we discover some improper behavior or activity, we regulate it or criminalize it. People develop a false sense of security—for example, when they assume that the products they buy at the drug store are safe because the government wouldn’t allow them to be sold if they were dangerous. People assume that they don’t need to consider the safety of the product on their own; they give up responsibility and leave the decision to a bureaucrat. It’s hard to develop true moral wisdom when the government, with all of its regulations and laws, is constantly telling us how to act.

Right and wrong become nothing but a question of law. Some people will see how much they can do without breaking the letter of the law. So, we shouldn’t be all that surprised when some people actually break the law.

In a culture where responsibility is a key virtue, people look to do the right thing, instead of just seeing how close to not being wrong they can get. To be responsible means to own both your successes and your failures. It means making sure you take care of your needs and obligations.

A responsible CEO will stand by his business’s practices, or change them to practices he will stand by. He won’t distort figures and data to hide the company’s—and thus his own—weak spots. It is only in accepting its failures and weaknesses that the company can improve and correct them. This is exactly what successful CEOs and businesses have always done. A culture of responsibility can help hold them to that standard.

Yes, we need laws. Fraud and theft are and should be illegal. The corporate executives who have violated their fiduciary duties and perpetrated fraud should be punished. But in order to prevent future Enrons and MCI WorldComs, we need a culture of responsibility rather than a byzantine system of regulations.

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