Archive for the ‘Business Ethics’ Category

by Professor Ernesto Poza

Serious ethical issues have been raised recently regarding several News Corp. properties. Several of its British media outlets stand accused of illegal wiretapping and voice and email eavesdropping. Should these prove to be true and indicative of a culture that is truly about corporate irresponsibility, both the Murdoch family’s reputation and News Corp’s institutional footprint and brand will be irreparably damaged. I am of the opinion that this will not happen. There is overwhelming research evidence suggesting that family business owners care about their reputation and their companies’ with a zeal unknown to mere executives and top managements. There is also plenty of anecdotal evidence that in the newspaper business, the legacy is not just the business but an institution that represents a public trust. Historical accounts at the New York Times, the Washington Post, the Seattle Times and El Nuevo Día certainly all claim these newspapers to be a public trust. Yes, there is always Martha Stewart, but is that not more the exception than the rule?)

Time will tell whether I am right or wrong on my assessment of James and Rupert Murdoch and the culture of News Corp. But News Corp. and the Murdochs are newsworthy on another very important subject; their strategic behavior, which is profoundly different from that of most S&P500 companies and decidedly long-term oriented.  News Corp.’s controlling Murdoch family stands in sharp contrast to the strategic behavior of shareholders of most large U.S. companies where the average shareholding period is down to nine months. In other words, these days shareholders are renting, not buying an ownership stake.

The Murdochs’ strategic behavior is also profoundly different from the actions of the Bancroft family, previous owners of The Wall Street Journal.  Just prior to their decision to sell Dow Jones and The Wall Street Journal to Rupert Murdoch, the Bancrofts squabbled over their legacy and their sense of responsibility towards the institution that their family had founded and built. Crawford Hill, a Bancroft family member in Spain at the time, spoke by phone with his cousins and other members of his family on the eve of the vote to approve the $60/share offer by News Corp. He said: “With all due respect, it is time for a reality check. What is missing from this discussion about Dow Jones and the Bancrofts is a sense of historical perspective and evolution…What most of you do not know is that the very same Jessie B. Cox that is mentioned at every turn as “family matriarch” and to whom many of us owe “the legacy” forced her incredibly talented husband, William C. Cox, top student at Milton and Harvard luminary, to retire prematurely from Dow Jones at age 40 so he could be full time in the social swirl of Cohasset. He was a star at the company! As to promoting legacy, neither she nor her daughter Jane, my mom, ever spoke of the legacy of Dow Jones, much less the possibility of actually working there or what it meant to be a steward of the business. There was no effort at promoting legacy, or educating the next generation, whatsoever…We talked about everything under the sun…but never Dow Jones…We never had, by the way, conversations that Sulzbergers (The New York Times), Grahams (The Washinton Post) and, yes, Murdochs, had every day! There has absolutely never existed any kind of family-wide, cross-branch culture of teaching what it means to be an active, engaged owner and more crucially, a family director. ¹

Meanwhile, in New York, Rupert Murdoch remained committed to the purchase of Dow Jones and The Wall Street Journal and appeared endowed with a sense of optimism in its long term value (at a time when media and newspaper entities were in crisis) that the Bancrofts could no longer fathom.

Across the Atlantic, James Murdoch (Rupert Murdoch’s remaining son in top management) was also behaving like a committed owner and making significant investments in expanding British Sky Broadcasting’s bundled services to subscribers. This at a time when nonfamily shareholders (BSky Broadcasting in London is Murdoch family-controlled but publicly-traded) fretted over the company’s debt. Here is how a Financial Times of London report in 2005 described it: “A chip off the old block – If investors in British Sky Broadcasting Group think that James Murdoch is spending too much money, they only need to look to Rupert. Just as Rupert Murdoch had done on many occasions, James has been incurring short term losses in search of a winning long term strategy. This time he has decided to invest 1.33 billion euros in an expansion to the Internet, broadband and telephony. The strategy appears to be crucial to the extent that competition has increased in the cable, satellite TV and telecommunications industries. He wants to offer customers a bundle of services. Even though his actions promise to reduce profits by 760 million over the next three years, the Murdoch family is very willing to bet on these long term strategies. But many of the nonfamily investors have their doubts.”

Why are two different classes of shareholders at odds over the strategy of the enterprise? Why are the Murdochs and the Bancrofts opting for such different futures? What role is the Murdoch family’s control playing in News Corp.’s strategic decision-making?

For that matter consider several other well-known family-in-business cases:

• The Ford family values its independence and long-term investment horizon. The Ford Motor Company did not need to sign up for US government bailout funds in early 2009 when both Chrysler and GM did. The company had secured private loans to see them through the worst recession for the auto industry since the Great Depression.
• Back in 1930, in the heels of the Depression, the family owned DuPont boosted its R&D spending in the interest of future innovative products.
• More recently in China, it is private ownership and free-market finance, not state control, that according to Yasheng Huang, an associate professor at the MIT Sloan School of Management, writing in McKinsely Quarterly, Q1, 2009, has led to China’s economic dynamism.

The strategic behavior of owners matters. The long-term family capital perspective exhibited by the Murdochs, the Fords, the Marriotts and millions of families that own and run smaller family enterprises throughout the world, makes a difference; it makes capitalism sustainable. Perhaps economic policy-makers in Washington should listen. And a hint to policy-makers, look at Germany; a country that is shouldering the European bailout and is still creating jobs and wealth. All of this largely on the backs of mid-sized family enterprises that make up the bulk of the world renowned German Mittelstand.

1. Wall Street Journal, July 27, 2007, p. B12.

About the author:

Ernesto Poza is a professor of global business at Thunderbird School of Global Management and director of Thunderbird’s Global Family Enterprise Center. He is the author of Family Business, 3e (2010) and has advised top managers of privately-held and Fortune 500 companies in strategic management, intergenerational entrepreneurial activity, succession planning, and governance.

 by Professor Melissa Samuelson

 A story of protests in India is getting little coverage here in the United States.  The protest leader, Anna Hazare, began a fast, calling for the anticorruption agency to have enforcement power over the entire government.  His opposition wants the agency to have only an advisory role. Undoubtedly, this movement has many political implications, but most interesting is the breadth of support Hazare has gained.  In a country where social issues are usually drawn along party lines, socio-economic status, or caste, the anti-corruption movement has united much of India.  In fact, polls find that 87-93 percent of Indians nation-wide support Hazare.

 In the United States, many people are quick to point to other cultures and claim that ethics and business practices are relative.  That it would be culturally insensitive to impose our laws or standards on the rest of the world.  In some ways I agree with this: cultures and values do vary around the world, sometimes greatly, and imposing your culture on others can have disastrous consequences.  But I think this viewpoint comes with a great danger: we ignore the voices of those in communities who want to change the prevailing system, we ignore the rights of people who suffer from unjust systems by claiming that the injustice is “cultural”.

 There is no doubt that the poor suffer greatly from bribery and corruption, yet prevailing systems leave them trapped.  This movement in India shows that we cannot ignore corruption as something is culturally determined or even as a culturally accepted “cost” of doing business.  By fighting corruption, or even recognizing and supporting those who fight it, we help to create systems that are more conducive to business, development, and true expression of human values.    

 Recommended reading link

 Melissa Beran Samuelson, is a clinical professor at the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management. Her research focuses on enhancing effectiveness of microfinance programs. She teaches business ethics and sustainability in the Entrepreneurship program in addition to a course on Microfinance and Microenterprise in India.  She oversees programs that enhancing entrepreneurship capacity in emerging economies.

By Professor Melissa Beran Samuelson

 As a business ethics professor, nothing annoys me more than ethics taught as a system of rules that students and business leaders must follow.  In fact, what draws me to the field is challenge of the topic, the ambiguity of finding your own path to deal with the practical challenges faced both personally and in business.

 This past week I attended the first Global Faculty conference on Giving Voice to Values.  This conference was the best I have ever attended on teaching ethics and gave great practical attention to empowering (NOT instructing) people to live their values through their business. 

 When we are in an ethical dilemma, we often know what the right thing to do is, but the trouble is being able to effectively act on our values.  Instead, we often work out our alternatives backwards, looking for what we think will give us the best outcome and then rationalizing the behavior.  Giving Voice to Values (GVV) turns this thinking around, focusing on developing tools (enablers) that allow us to expand those alternatives while also recognizing and breaking down barriers that disable or block our tendency to act with integrity.

 My favorite thing about the Giving Voice to Values philosophy is that it works for anyone, working in any corporate environment, in cultures around the world.  The challenges we face in ethical behavior are often embedded in context: our industry, workplace, laws, culture, values, and even individual personalities.  GVV allows us to develop a personal strategy for dealing with the individual challenges we might face so that we can do what is right, regardless of the context.

 The conference was at Babson University and is rooted in the work of Mary Gentile, author of the book Giving Voice to Values: How to Speak Your Mind When You Know What’s Right.  I’ve met Mary on a couple of occasions and I’m very excited about the growth of Giving Voice to Values and I highly recommend her very readable book to anyone looking for more effective ways to break down the barriers to ethical business practices faced around the world.

 Melissa Beran Samuelson, ABT is a clinical professor at the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management. Her research focuses on enhancing effectiveness of microfinance programs. She teaches business ethics and sustainability in the Entrepreneurship program in addition to a course on Microfinance and Microenterprise in India.  She oversees programs that enhancing entrepreneurship capacity in emerging economies.