Rockefeller, David

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Hofstra Law Review Volume 8 Issue 1 Article 7 1979 Ethics and the Corporation David Rockefeller Follow this and additional works at: https://scholarlycommons.law.hofstra.edu/hlr  Part of the Law Commons Recommended Citation Rockefeller, David (1979) "Ethics and the Corporation," Hofstra Law Review: Vol. 8: Iss. 1, Article 7. Available at: https://scholarlycommons.law.hofstra.edu/hlr/vol8/iss1/7 This document is brought to you for free and open access by Scholarship @ Hofstra Law. It has been accepted for inclusion in Hofstra Law Review by an authorized administrator of Scholarship @ Hofstra Law. For more information, please contact lawscholarlycommons@hofstra.edu. ETHICS AND THE CORPORATIONDavid Rockefeller*We have been hearing a great deal lately about the want ofethics in public and private life, about the need to set standardsand pass laws affecting official and private behavior. The danger inall this is that we may substitute platitudes for deeds, that we willtalk too much and do too little. For while ethical ideas do lendthemselves to codes and to statements of principle, their real forceand validity can come only from putting them into effect. Never-theless, we must start with ideas and principles. Every society, ev-ery institution, every organization, and every individual needs a setof moral guidelines, not only for internal governance but also forthe conduct of its external affairs. In large parts of the world todaypeople have minimal need for codes of ethics, because their gov-ernments tell them how to think, how to express themselves, howto act, and how to serve the state. But a moral foundation is imper-ative in a free society that affords each individual the latitude forindependent thought and action. Without ethical values a free soci-ety would become a jungle, and then, seeking order at any price,would soon find itself no longer free.Making free choices in areas where there are competing inter-ests are among the toughest problems faced by a free society. Some ex-amples that come to mind are the conflicts between the demandsfor more energy and the pleas for a cleaner environment; the con-flict between the public's right to know and the individual's or theinstitution's right to privacy; the widening breach between thedemocratic ideal of equality and the respect that has traditionallybeen accorded to excellence within a democracy. In resolving thesedifferences ethical considerations guide our ultimate decisions andactions. A simple sense of responsibility and duty to others canprobably help us more than months of congressional and editorialdebate. We all know, for example, that the world must have moreenergy if it is to raise the living standards of a still-growing popula-tion and accommodate the crying needs of the poor and underpriv-ileged. We also know that it would be against the long-run interestof society to obtain that energy at the expense of an unacceptable* Chairman of the Board of Directors, The Chase Manhatttan Bank, N.A.1Rockefeller: Ethics and the CorporationPublished by Scholarship @ Hofstra Law, 1979136 HOFSTRA LAW REVIEW [Vol. 8:135level of pollution. Making the necessary trade-offs will require ahigh order of moral and responsible behavior on the part of all ele-ments of society-the producers of energy, the regulators in gov-ernment, and the public at large.It is clear that ethics must play an important role in the searchfor solutions to our problems. From my own perspective, that be-comes most obvious in the world of business. Ethical principles arethe glue that holds the business system of a free enterprise societytogether. Business runs on mutual trust and confidence that otherswill live up to their word. The marketplace, which is the heart of abusiness society, could not exist without it. As Benjamin Franklinonce observed, "If the rascals knew the advantage of virtue, theywould become honest men out of rascality."' Stanley Marcus, ofthe Nieman-Marcus Stores, expressed the same thought anotherway in his memoirs: "There is never a good sale for Nieman-Marcus unless it's a good buy for the customer."2 The real point isthat honesty is not only good business policy, it is also a vital in-gredient for carrying on a successful business.By and large, I believe that the typical American business en-terprise is keenly aware of this and has made a genuine effort overthe past decade to improve its performance in serving society'sneeds. Indeed the term "social responsibility" has become a per-manent part of the corporate lexicon. Many companies, however,have encountered problems in applying the concept to their day-to-day business operations. To some, social responsibility has meantstepping-up financial contributions to urban projects. Other com-panies have undertaken programs to minimize pollution, train thehard-core unemployed, or counsel the disadvantaged. All of theseare valid answers but, frankly, we often have a hard time comingto grips with what we mean by the concept.Clearly, however, with our country's confidence badly shakenby disturbing disclosures of corporate bribery, illegal campaigncontributions, and scandal at the highest levels, business has nochoice but to alter dramatically the way it discharges its social re-sponsibilities. Specifically, the time has come for companies tomove beyond narrow notions of corporate social responsibility andto adopt instead a more deep-rooted and pervasive framework ofethical policies and procedures that will guide every decision thecorporation makes.1. Quoted in C. VAN DOREN, BENJAMIN FRANKLIN 650 (1938).2. S. MARCUS, MINDING THE STORE 3 (1974) (emphasis in original).2Hofstra Law Review, Vol. 8, Iss. 1 [1979], Art. 7https://scholarlycommons.law.hofstra.edu/hlr/vol8/iss1/7CORPORATE ETHICSEthics are already incorporated into management decisions inmost American companies, but on an individual, intuitive basis.The challenge now is to "institutionalize" ethics by shaping specificcorporate codes of conduct and integrating ethical practices morefirmly into corporate policy. Developing a comprehensive code ofethics for a corporation is no easy task. One of my colleagues atChase Manhattan Bank compares it to "nailing a custard pie to thewall": Moral generalities are often too broad to be meaningful; yeta complete list of "thou shalts" and "thou shalt nots" is not onlyimpossible, but also too restrictive of individual freedom of choiceand action.At Chase Manhattan Bank we took an approach somewherebetween these extremes. We sought first to establish a properclimate for making ethical decisions within the bank; and second,to provide illustrations that built a framework that provides practicalguidance. We based our approach on four fundamental corner-stones that for us seemed essential to the highest standards of busi-ness conduct: (1) Honesty and candor in all activity, (2) integrityin the use of corporate resources, (3) avoidance of conflicts of inter-est, and (4) fairness in dealings with all.Let me illustrate briefly how we apply these values in our nor-mal course of doing business at Chase. The nature of the bankingbusiness demands that we practice absolute honesty in all our af-fairs. Banking is based on mutual trust, on the faith and confidenceof the public. In a working sense, this translates into strict internalpolicies governing personal fees, commissions, solicitation or ac-ceptance of gifts, and the like. It also demands an atmosphere thatfosters candor among our employees in reporting promptly anyquestionable or illegal action that may come to their attention.As for integrity, a bank's right and ability to manage the re-sources for which it is responsible is affected, directly or indirectly,by many different constituencies--our stockholders, our custom-ers, governmental agencies, the communities we serve, our staff,and the public at large. In dealing with these diverse groups, it iscritical that we treat these resources in the most prudent andproper manner. This has profound implications, for example, insetting loan policy, which touches the lives and interests of many.Chase's general policy is to pay strict attention to the legal, moral,and social implications of all of its loan decisions, over and aboveour normal concern that we make safe loans at a fair return.In the case of loans to South Africa, for example, this approachhas resulted in a policy that specifically excludes loans that in our1979]3Rockefeller: Ethics and the CorporationPublished by Scholarship @ Hofstra Law, 1979HOFSTRA LAW REVIEWjudgment tend to support the government's apartheid policies orreinforce discriminatory business practices. Conversely, we arewilling to consider loan proposals for projects of a productive na-ture that we believe will result in social and economic benefits forall South Africans. Invariably, our policies with respect to a partic-ular part of the world will change as circumstances change. Re-cently, Chase and two other United States banks agreed to providethirty-three million dollars in loans to urban blacks in South Africafor housing construction. The funds will be channeled through theUrban Foundation, a private business group promoting construc-tive social change in South Africa. Perhaps the effort will not makea significant dent in apartheid, but it should make a contribution toimproving the living standards of thousands of South Africanblacks. While I do not doubt the sincerity of those who oppose allcorporate involvement in South Africa, it is doubtful whether theyhave fully considered the fundamental economic needs of the ma-jority of South Africans. Government and business alike must giveas much consideration to the ultimate effects of their policies asthey give to their intent.To be sure, there is a certain risk inherent in linking lendingpolicy to a set of ethical standards. But taking risks lies at the veryessence of our free enterprise system. And ethical risks, like otherbusiness risks, must be weighed in the final balance, becauseavoiding them ignores our public trust.The third cornerstone of Chase's Code of Ethics is to avoidconflicts of interest. Like lawyers and doctors, bankers enjoy a spe-cial relationship with their customers. Because we must understandin great depth the financial aspects of so many individuals and or-ganizations, it is essential that we avoid conflicts of interest inter-nally or breaches of confidence externally.The fourth and final tenet of our ethical code is a commitmentto total fairness in our dealings with all. Internally, this meansmaintaining high standards in employment practices and continuingthe traditional social responsibility efforts: Affirmative action, jobenrichment, training and educational opportunity programs, andthe like. Externally, fairness requires that we treat customers, po-tential customers, and the communities we serve with respect andunderstanding-as indeed we would have them treat us.In creating our own code of ethics we borrowed much fromothers and from the long traditions of civilized societies. Essen-tially, what we have learned is that corporate morality must bebased on principle, not self-serving policy, and on conviction, not[Vol. 8:.1354Hofstra Law Review, Vol. 8, Iss. 1 [1979], Art. 7https://scholarlycommons.law.hofstra.edu/hlr/vol8/iss1/7CORPORATE ETHICSexpediency. It must not be steered by the way the wind happensto be blowing, but must hold firm in the face of adverse winds.The code reaffirms our belief that ethics are an essential ingredientof business behavior, and that honesty, integrity, and fair dealingsare sound business practices as well as vital parts of our moral un-derpinning. Unfortunately, in many parts of our society cynicismhas reached the point where such reaffirmation is necessary, andwhere dishonesty and unfairness need to be restigmatized in theminds of many.While values are intensely personal, the most successful na-tions and the strongest societies and institutions are those in whichvalues are clearly perceived and widely shared. With some carefulsoul-searching, I think we could quickly discover that our values asa nation are not as fragmented, not as divergent, not as irreconcila-ble as many believe. If this is so, it should be possible to mit-igate many of the differences and conflicts of the past and pursuewith renewed determination and judicious balance the achievementof a greater and deeper sense of mutuality and brotherhood.5Rockefeller: Ethics and the CorporationPublished by Scholarship @ Hofstra Law, 19796Hofstra Law Review, Vol. 8, Iss. 1 [1979], Art. 7https://scholarlycommons.law.hofstra.edu/hlr/vol8/iss1/7

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