NO PLACE FOR SCRUPLES

...What pressures are brought to bear on the otherwise upright individual who becomes a middle manager or senior executive...

...They're making money...

...There is a disengagement of normal ethical standards from business life," says Gary Edwards of the Ethics Responsibility Center...

...Corporate crime "becomes part of the culture...

...When a corporation commits a serious crime, especially one that causes death, individual officers within the corporation—despite the cushioning of bureaucracy—still face a personal crisis: Their self-image as ethical human beings stands under attack...

...It's the system itself: No one in a corporation is free to act according to his own best conscience...

...At every step of management, the ethical standards of the lowest prevail," says Miles Lord, who presided at one of the A.H...

...Hutton case, corporate criminals are laughing all the way to the bank, for Reagan has validated their own self-justifications...

...They don't think of it as crime...

...Like other company employees, chief executive officers have their careers hitched to the short-term profit, especially in our time, when corporate raiders can swoop in and pluck any faltering firm...

...Business analysts who have examined the issue of corporate crime find such a phenomenon taking place...

...The market ethic says if it's profitable, it's probably OK," comments Ken Goodpaster, associate professor at Harvard Business School...

...There is a certain—perish the thought—God-like quality of being head of a corporation...

...What counts is turning a buck—any which way you can...

...All of us like to get pats on the back from the ultimate power structure...

...A.H...

...They think, 'Because I say so and because where I am, it's therefore right and ought to be obeyed.' " Once the chief executive officer gives the word, the whole company swings into action...

...So there's pressure to compartmentalize, to do all the right things in your family and community life, but to disengage your moral sensibilities in business...

...Eli Lilly pleaded guilty to twenty-five counts of failing to inform the Government of the fatal effects of the company's anti-arthritis drug Oraflex, and a host of other companies had to cash in their get-out-of-jail-free cards...

...Even the president of the corporation is a victim...

...And at the top level, the executives don't want to know...

...This knowledge can't be absorbed by the self in any fashion...

...selling dear...

...But not all corporate criminals are evil people...

...When the group arrives at an objective, you have this pressure multiplied by the number of people in the group...

...One Government attorney, who requested anonymity, speculates that "the incidence of corporate crime is 100 times what the authorities ever hear about...

...They find some way to talk to themselves about crime without thinking of themselves as criminals...

...The incentives corporations give force employees to do such things...

...What you have coming at middle managers on a continual basis is profit performance," says Gary Edwards, executive director of the Ethics Responsibility Center in Washington, D.C...

...They knew the dangers...

...According to a summer CBS-New York Times poll, 55 per cent of Americans believe that most corporate executives are dishonest and that corporate criminals get off virtually scot-free...

...The first day on the job, you're surprised when an egg falls on the floor and you see the cook put it back in the skillet, but after you see him do it day after day, you think it's normal...

...Even in corporations that don't conflate morality with profit, the fundamental imperatives of business—to make money, fast—can breed corruption...

...What you have sometimes," says Goodpaster, "is a situation where the moral values of the individual will come into conflict with the mores and mindset of the corporation and will cause that individual to become anesthetized— to put the individual mindset on hold and take on the mindset of the corporation...

...The Committee for Economic Development, a business-dominated group, publishes a report blaming America's schools for failing to foster honesty...

...This obsessive concern for profit typifies many corporations...

...The first trench is not acknowledging the connection between the corporate product and the harmful result...

...The bureaucratic pressure to conform is almost irresistible...

...more often than not, they are pillars of the community...

...The floodgates are open, and businesses are taking every advantage...

...They perceive what has eluded the textbooks for two centuries: that Adam Smith's invisible hand wears a black glove...

...To some extent, corporate crime derives not from any characteristic peculiar to the profit-making enterprise but from the nature of bureaucracy itself...

...To calm it, they engage in elaborate self-deception...

...Basic to any bureaucracy is the diffusion of responsibility among hundreds of individuals, myriad organizational structures, and semi-autonomous specialties...

...The sharpies get promoted because they produce a little bit more," says Barrett of the House Energy and Commerce staff...

...This spate of misconduct brings into focus a self-evident but long-denied fact about the business world: Corporate crime is no aberration...

...Freed from the yoke of moral accountability, individuals harness themselves to the goals of the bureaucracy, whatever those goals may be...

...You say, 'Well, the lawyers will catch it, the engineers will catch it, the accountants will catch it, the CEO [chief executive officer] will catch it.' When so many share a part in the decision, it absolves any one of them of a sense of responsibility...

...It's a very complex porridge," says Ralph Nader...

...Robert Jay Lifton, professor of psychiatry and psychology at City University of New York's John Jay College of Criminal Justice, calls "psychic numbing—the diminished capacity to feel...

...You have to understand how a large corporation thinks," says prosecutor Cosen-tino...

...With fewer Government investigators, there's a catch-me-if-you-can attitude...

...When push comes to shove, the values and rewards become more important to them than the threat of being punished or the fear of what their family is going to say...

...What's more, the person's identity becomes so wrapped up with the group that morality all but disappears...

...it is as much a part of the free enterprise system as buying cheap and Matthew Rothschild is an associate editor of The Progressive...

...Like governments and universities, modern businesses bear all the earmarks of Max Weber's loathsome discovery: Such organizations require that you check your morals at the door...

...They come up with a whole series of denials of evidence," says Dr...

...One company buys television advertisements to puff the virtues of the "entrepreneur," and another boasts of "making money the old-fashioned way...

...The ultimate objective is profit, no question about it, but on the level of the individual, it's the bureaucratic impulse...

...Tuttle, who also represented Exxon, adds another common reason why people go along: "There is this tendency to please the boss—whether it's Ma and Dad at home, the teacher in grade school, the chancellor of a university, the head of a company, or the President of the country...

...They deny knowledge," says Miles Lord...

...A study was done as to what it would cost to fix the car as opposed to the cost of collisions and personal injuries," Cosentino says...

...CASHING IN No Place for Scruples What counts is turning a buck-any which way you can L* BY MATTHEW ROTHSCHILD This season, The Wall Street Journal, the daily blotter of corporate crime, is bulging with accounts of transgression, E.F...

...And often those who cut the corners win the cheese...

...Corporate incentives to perform, coupled with bureaucratic pressures to conform, turn the boardrooms into incubators of crime...

...And with the Justice Department's failure to prosecute any individuals in the E.F...

...This system can rot every rung of the corporate ladder as the cheaters get promoted and the individuals who harbor scruples fall by the wayside...

...The study indicated it was more beneficial not to do anything about it...

...If the person at the top creates an atmosphere of profit at any cost, you can have a corrupt institutional ethic," says Mark Green, president of the Democracy Project and co-author of The Challenge of Hidden Profits...

...But from nine to five, a lot of managers lose their identity in the collective vat that is the corporation...

...But privately, the conflict may still rage...

...It's like watching the cook in the restaurant...

...These guys who rise to the top, most are hard-driving, egocentric, A types," explains Tuttle, now a law professor at Oral Roberts University...

...Exxon was slapped with a $2 billion fine for bilking consumers and the Government...

...The basic principle is that they learn to talk about crime as if it isn't crime," says Don Cressey, criminologist at the University of California at Santa Barbara...

...Robins with its Dalkon Shield (see Page 20) and Ford Motor Company with its Pinto come readily to mind...

...The most immediate claim is loyalty...

...Under the Reagan Administration, corporate crime has come into its own...

...There's great encouragement in the new Reagan-Meese design in letting actual criminals off," Galbraith says...

...That's how corruption spreads...

...No matter how successful they are," says Diane Vaughan, Boston College sociologist and author of Controlling Unlawful Organizational Behavior, "in order to keep their position and their status, these companies experience the same pressures" to commit crime...

...You go along," Galbraith notes, "and if you don't, you become an outsider...

...That is what Adam Smith really told us about capitalism: Profit is the best safeguard of the public good...

...Not all businesses come up with such candid cost/benefit analyses, but the same message often percolates down from senior management...

...With everything—salaries, bonuses, promotions, careers—geared toward the short term, the incentive to cut corners mounts with the pressure to perform...

...Sidney Wolfe, director of Public Citizen's Health Research Group...

...They pretend they don't know...

...To protect themselves, they marshal curious psychological defenses...

...These fellows at the very top are not free from pressures, but the pressure is considerably more subtle," says Roger Tuttle, who represented A.H...

...When you're just one hand that yanks the chain, you feel you are not responsible...

...They seem to manifest what Dr...

...There's nobody inside the corporation who can say, 'Hey, come clean,' " Nader points out...

...Robins Dalkon Shield trials and is now in private law practice in Minneapolis...

...Hutton's check-kiting scheme being only the most sensational...

...When you are responsible for the consequences of your actions, you act responsibly," Mark Green adds...

...No one man is responsible—there are committees, boards, panels...

...The bottom line is, after all, the bottom line...

...It's a problem of bureaucracy in general," says Christopher Stone, law professor at the University of Southern California...

...Financial considerations" impelled Ford to keep Pintos on the market even though the company knew the cars exploded when hit from the back, says Michael A. Cosentino, a prosecutor in Elkhart, Indiana, who unsuccessfully sued Ford on three counts of reckless homicide in 1980...

...They discussed putting in safety features, but they didn't want to spend the money...

...It all goes up vertically, all with incentives not to do the right thing...

...One may know certain things but the emotional component can be suppressed through other influences—goals for which this knowledge is disturbing, unacceptable, or threatening...

...Bovine obedience to the group prevails...

...Such cupidity occurs not just in small, fly-by-night operations but in the giant Fortune 500 companies as well...

...Robins and acknowledged under oath that the company had destroyed documents relating to the Dalkon Shield...

...But the make-up artists can't cover all the warts...

...Lifton, who has studied Nazi war criminals, says "a split between knowledge and feeling" can occur...

...It's a moral schizophrenia: You tell yourself that to succeed in business you need to follow different rules of behavior...

...Once the connection is irrefutable (and corporations will pay lawyers millions of dollars to find loopholes through which to wriggle), executives tend to pass the buck...

...It seems to me it's increasing," says Mike Barrett of the House Energy and Commerce staff...

...Lie, cheat, steal, and kill—these are the commandments of capitalism, obeyed by the Robber Barons of the Nineteenth Century just as they are by the Harvard MBAs of the Twentieth...

...This, anyway, is what they say publicly...

...Being in a corporation "would encourage misconduct in anyone," Vaughan says...

...The environment within an organization provides competing claims," says Professor Stone...

...John Kenneth Galbraith says "bureaucratic regimentation, overwhelmingly," leads corporate officers to a life of crime...

...Ithink it's just greed," says Jay Mag-nuson, the Cook County, Illinois, prosecutor who this year won murder convictions against the president and two other officers of Film Recovery Systems, Inc., after a Polish immigrant died of the cyanide fumes he inhaled while working at the company...

...There's a very fine line between a clever business deal and a criminal activity," Vaughan says...

...It's a very agreeable arrangement, as it exempts individuals from wrongdoing...

...They turn their backs...

...Some corporations have that built into their mindset, and that can lead people to behave in unethical ways...

...Eventually, you're going to have people in the organization whose consciences are asleep because the corporation has weeded out all whose consciences were awake," says Goodpaster of Harvard...

...Personal prestige and reputation, as well as economic well-being, rise and fall with the well being of the organization," says Boston College's Vaughan...

...It's inherent in the position itself...

...That's a powerful message to middle managers...

...Amidst all the felonious activity, corporate America still tries to gloss its image...

...And having crossed the ethical divide, how do these corporate officers sleep at night...

...There's a whole lot of rascality going on," says Michael Barrett, staff director and chief counsel of the House Energy and Commerce subcommittee on oversight and investigations...

...How do individuals who lead exemplary lives of private virtue succumb to depravity once they enter the corporate suites...

...The culture of most corporations dictates that the people who get promoted "are the people who meet and exceed the profit projections for the quarter...

...They don't confront themselves with what they're doing...

...The senior people become schizophrenic about it...

...Ken Goodpaster of Harvard also observes this tendency but puts it in slightly different terms...

...And the high brass adds its own impetus to unseemly behavior...

...The problem does not lie with the individual, but with the organization and its structure...

...It's a rare individual who stands up to a group and says, 'You people are all wrong,'" comments former Robins attorney Tuttle...

...they're doing better than their competitors...

...They think of it as solving a business problem...

...Once enmeshed in the system, the individual participants conjure up a whole variety of defense mechanisms to shield themselves from the implications of their actions...

...They want the corporation to be profitable, and they want to be thought of as good managers...

...It becomes the thinking of a corporation, not an individual...