A Time for Ethical Self-Assessment

Peter Drucker's literature on business scruples and the Ethics of Prudence is newly timely, and not just because of the holidays

By Rick Wartzman

This may be the season of giving, but it sure feels like everybody is suddenly on the take.

Siemens (SI), the German engineering giant, agreed this month to pay a record $1.6 billion to U.S. and European authorities to settle charges that it routinely used bribes and kickbacks to secure public works contracts across the globe. Prominent New York attorney Marc Dreier—called by one U.S. prosecutor a "Houdini of impersonation and false documents"—has been accused by the feds of defrauding hedge funds and other investors out of $380 million.

And then, of course, there's financier Bernard L. Madoff, who is said to have confessed to a Ponzi scheme of truly epic proportions: a swindle of $50 billion, an amount roughly equal to the GPD of Luxembourg.

All told, it begs the question that Peter Drucker first raised in a provocative 1981 essay in the journal The Public Interestand that later became the title of a chapter in his book The Ecological Vision : "Can there be "business ethics"?"

Drucker didn't pose this to suggest that business was inherently incapable of demonstrating ethical behavior. Nor was he positing that the workplace should somehow be exempt from moral concerns. Rather, his worry was that to speak of "business ethics" as a distinct concept was to twist it into something that "is not compatible with what ethics always was supposed to be."

What Drucker feared, specifically, was that executives could say they were meeting their social responsibilities as business leaders—protecting jobs and generating wealth—while engaging in practices that were plainly abhorrent. "Ethics for them," Drucker wrote, "is a cost-benefit calculation…and that means that the rulers are exempt from the demands of ethics, if only their behavior can be argued to confer benefits on other people."

It's hard to imagine that a Madoff or a Dreier would even attempt to get away with such tortured logic: an ends-justify-the-means attitude that Drucker labeled "casuistry." But we all know managers who've tried to rationalize an unscrupulous act by claiming that it served some greater good.

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