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Ignacio Ferrero: "The purpose of business is not just to make money".

The Dean of the School of Economics at the University of Navarra explains the importance of ethics in business practice and affirms that ethics and Economics necessarily have to get along well, "because they are inseparable".

CULTURE, LEADERSHIP AND COMMUNICATION / ALBERTO ANDREU


Dean of the School of Economics and Professor of Ethics... The question is: how does Economics , in general, get along with ethics? I ask this because some (many) think that you can't make money by being ethical... as if talking about Economics ethics is an oxymoron...

I understand that when you ask me about Economics you are referring to economic activity or rather to business activity. Well, they must necessarily go hand in hand, that is to say, they are inseparable. Every activity, every free human decision is ethical, there is a moral dimension in which responsibility can be assessed staff in the decision and in the subsequent consequences. The core topic is that from an ethical perspective these decisions are well taken. In principle there is no incompatibility between making money and being ethical. The problem is knowing how to make money by doing things right, using reasonable means, which is why I like to qualify the principle of profit maximisation (which according to economic models guarantees the efficient allocation of resources and that is very good) by adding either an adjective reasonable profit, or an adverb reasonably maximising profit. The word reasonable has many implications, because it means many things: respecting human rights and laws, treating employees and all stakeholders with dignity, fair pay, decent conditions at work, facilitating conciliation and the integral development of all, providing good, safe, useful goods or services that contribute to the common good and respect the environment, that are sustainable, at skill fair, reasonable prices, and a long etcetera.


As concepts are important, and as we are at university, I have always wondered what the difference is between ethics and integrity. Or are they equivalent concepts?

Ethics is a science that studies human behaviour in order to know how to make good decisions that make the world a better place, starting with the person making the decision. Integrity is a quality of the person who shows that their decisions are coherent with their values, who acts in conscience and is consistent, who does not allow themselves to be carried away by short-term interests.

"It is good to maximise profit; the point is to do it in a reasonable way, i.e. by doing things right.

 

or selfish, but keeps me consistent to its values, in all possible areas of its decisions. Ethics is related to integrity, because humanity's intellectual reflection on right and wrong and how they apply to our actions, makes it easier for us because they give us arguments to be of integrity.

management As you know, throughout my professional career, degree program , I have had to implement ethical systems in corporations, creating mechanisms and counterweights so that decisions would respond to a certain corporate ethics. In your opinion, what is more important for us to be able to say that a company is ethical? corporate ethics or ethics staff?

I find the question very interesting. If I had to choose between the two, as if they were mutually exclusive, I would opt for the staff ethic because it is the only one that exists in reality. The decisions people make are deeds and not words. But undoubtedly, in order to create an ethical culture on business , words are also necessary, i.e. they are not mutually exclusive, but complementary. They even reinforce each other. It is advisable, if not necessary, to have a certain statement of values, which will inspire subsequent decisions, a mission statement and a vision, a known and shared purpose , channels for employees to raise their doubts, programmes on training that provide employees and managers with guidelines for action. All these policies, together with the coherence and example set by managers, create a sensitivity and an ethical awareness that permeates organisations and helps ethics to permeate staff.

If we were to carry out a kind of ethical audit of a business... What are the first practices or behaviours you would look for in order to be able to say that you are dealing with an ethical business ?

In the previous answer I gave a brief list of some ethical practices. They are not all of equal importance, and they follow a certain chronological order. I would say that the first thing is to define the purpose of the business, which is the raison d'être of the business, and that it is not just about making money. That is an instrumental goal , necessary, but it is not what gives meaning to human activity. If this were the case, it would be an absolutely impoverishing mentality of work, losing the meaning of work as source of meaning, satisfaction and happiness for life staff. The purpose must define what is the service to be provided to society and how it is to be provided. This purpose, either in the form of the mission statement or the vision, or simply as purpose, must be coherent with the values that the organisation establishes as referents. And from there, which is the most general, to the most specific: codes of conduct and governance, guidelines in the training of workers, how conflicts are resolved, what support and financial aid is given to employees to help them with their professional and personal problems, how employees are helped to find meaning in their work (closely related to the purpose of the business).

"The decisions people make are deeds and not words".


Shortly after the reform of the Criminal Code was approved with the introduction of the figure of compliance, the Attorney General's Office issued a circular in which it said that what was really important was not that companies set up a complete compliance procedure , but that they ensure a culture of compliance and ethics in the corporate culture and throughout the chain of command when it comes to making decisions. So the question is this... what needs to be done to embed ethics in the corporate culture and decision-making process?

Months ago I had a meeting with high school Compliance and Ethics to look at possible joint collaborations, and the first thing I said to them was that I like the word ethics to come along with compliance. Clearly, compliance procedures are very important, establishing rules and guidelines, channels and practices that ensure in some way that employees are going to do the right things, that they are going to make the right decisions. But it is even more necessary to train people in the virtue of prudence, whereby we learn to apply general principles and rules to particular situations. Because the circumstances involved in each decision must be considered, and sometimes these particularities cause the rule to be applied in a different way. Employees must have the theoretical and actual ability, i.e. be trained and enabled, to apply the rule to the specific case. This sometimes implies a freedom, which may seem arbitrary, but which is not, because it is the ability of human beings to think and decide. Otherwise, the problem of a world that is too standardised, trying to cover all possible particular situations, means that we lose humanity, and that we become more and more like robots, who move according to protocols marked by algorithms. And a world run by robots, no matter how much artificial intelligence is developed, is inhuman. We have a lot at stake in people's training exercise of prudence.

In your experience, and if we go to periodicals collection.... What are the most revealing cases or examples you have come across where ethical criteria have prevailed over economic criteria? And vice versa?

There is a paradigmatic case which is the decision taken by Aaron Feuerstein, president of the textile business Malden Mills, located in a small town in Massachusetts (Lawrence) when one of its factories caught fire and instead of collecting the 300 million dollars of insurance and closing the business and retiring, reasonable with 76 years old, he decided to fight, go ahead and rebuild the business, keeping the full salary of his 3000, although some had nowhere to work. His workers tripled the productivity of the plant that did not burn down, working overtime, giving their all for business. That is creating a community of people, which is what a business should be, where everyone feels part of it, is involved and important.

Turning to more recent cases, there are companies with an impressive ethical culture, such as Danone, Michelin, Patagonia, John Deere, Kellogs, Mondelez... but even very reputable companies can make big mistakes at other times. Take the case of Johnson and Johnson, which gained a very good reputation 40 years ago with the famous case of Tylenol, an effective, safe and widely consumed painkiller, but which apparently started to cause some deaths, seven, in the United States in the early 1980s. The business, although the connection was not confirmed, recalled 30 million tablets, causing a loss of 100 million. It was later found that a madman had contaminated some tablets with cyanide, but in very few units. Their credo on that occasion outweighed the profits. The same business, through a subsidiary De Puy, launched hip prostheses on the European market some 15 years ago, which had not obtained FDA (Food and Drugs Administration) authorisation for the marketing of these prostheses, but sold them in the rest of the world because the requirements are less demanding, taking advantage of a legal loophole, knowing that they could put the health of many people at risk. Ten years ago, it had to recall these prostheses and pay $4 billion in compensation to many patients for causing them harm. This time, the loss of profit by going for the slower but safer system of obtaining authorisation caused them to violate the credo, which for more than a century has illuminated the business.

"A world run by robots, no matter how much artificial intelligence is developed, is inhuman".

And finally... What has been the most favourable surprise you have had when teaching class ethics to your students? (The unfavourable one, if you like, we'll forget it).

There are many, most of them in the form of e-mails from students who comment after finishing subject that it has changed the way they see many aspects of business. But receipt even more emails from alumni, asking me about doubts they have at work, because they want to do things well. I think that, evidently, not only because of my subject, but because of the whole of the training project of the School and the University of Navarra and the example of the faculty and staff of the University, the students leave the classrooms very well trained technically, but at the same time with a set of virtues and with a real and effective desire to be well-rounded people who seek to make this world a better place. One student, on finishing her programs of study , came to my office to thank me for the fact that at university we had taught her to love people. This is the core topic to always get it right in professional practice and, at final, in life.

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