Can PR Be a Corporate Ethics Watchdog?
Charting the future of public relations
Holmes Report

Can PR Be a Corporate Ethics Watchdog?

The idea that public relations, a discipline largely associated in the public mind with mendacity and obfuscation and spin, might be able to provide corporate America with some sort of ethical compass is clearly laughable—even to public relations practiti

Paul Holmes

Last month, The Wall Street Journal published an article detailing moves by several major public relations firms to provide counsel on governance issues, at a time when corporate ethics are under unprecedented scrutiny. The PR firms in question are providing counsel “aimed at short-circuiting worrisome issues before they burst out as PR nightmares,” the Journal reported.

Most of those questioned expressed skepticism about whether public relations advisors could play any constructive role in improving governance. “I don’t care what the PR firms do,” said Richard Steinberg, a money manager. “It is spin, we recognize spin, and it is up to the investors to find the gem through the noise. If investors see something that is fundamentally wrong, or a cover-up, they will make decisions that hurt the share price”

A few days later, a public relations practitioner chimed in, via a letter to the editor. “Public relations firms giving advice on corporate ethics? That sounds like a plot line straight out of a movie by Woody Allen,” wrote Jeff Barge, president of Lucky Star Public Relations in New York. “How scary.”

The idea that public relations, a discipline largely associated in the public mind with mendacity and obfuscation and spin, might be able to provide corporate America with some sort of ethical compass is clearly laughable—even to public relations practitioners.

Yet there was a time, not very many years ago, when public relations people like to describe their role as being “the conscience of the corporation.” While there are problems with that description—people have consciences, artificial legal constructs do not—it contains a germ of truth about the proper role of PR. Public relations is about building and maintaining mutually beneficial relationships, and it is axiomatic that successful relationships can only be built on a foundation of honesty and integrity.

The public relations function can—and should—play a leadership role in corporate ethics. In too many corporations, the chief ethics officer is in actuality responsible for little more than compliance—a legalistic definition of ethics that encourages the belief that anything permissible under law is also, by definition, ethical. That’s the mindset that allowed companies to use pro forma reporting to smooth and massage their earnings.

If lawyers do not make good corporate ethicists, there’s no reason to believe that academically trained moral philosophers will do any better. More than 80 percent of corporations have ethics codes—Enron was particularly proud of its code of ethics—and many employ business ethicists. Where were they when the companies they worked for were making the decision that led to today’s crisis of confidence in American business?

Says Gordon Marino, professor of philosophy at St. Olaf College in Minnesota, “I trust the ethics specialists at, for example, WorldCom were out of the loop, but then what good does it do to hire experts to act as the company’s conscience and then keep them in the dark about the company’s inner workings? If it was the business of some ethicist to keep moral tabs, why wasn’t he pressing the kinds of questions that would have defused the shenanigans of the money mongers?”

Marino suggests two reasons why business ethicists failed to keep business on the straight and narrow. “First, there are simply no grounds for believing that a person can become an authority on matters moral in the same way that he might on market strategies; that is, by mastering the appropriate information and literature. You can memorize Kant and still be a moral dunce.

“More important… the idea of ethics experts invites us to believe that the ethical implications of what I am doing are not my business but rather the business of the ethics office down the hall. After all, if there are experts on ethics, then who am I, a non-expert, to pass moral judgments?”

To assess the role of public relations practitioners in the business ethics process, it’s worth taking a moment to examine the term “business ethics,” since there is far from universal agreement about what it means or even whether it has meaning at all.

Those who believe in Adam Smith’s invisible hand—which assures that the public interest is served when individuals and corporations pursue their own narrow interest—often take the view that the only social responsibility of business is to maximize shareholder returns, a view that is reinforced by the fact that a corporation owes a fiduciary responsibility to its shareholders alone.

Says Milton Friedman, “In a free enterprise, private property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much possible while conforming to the basic rules of society….

“What does it mean to say that the corporate executive has a ‘social responsibility’ in his capacity as a businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers…. The corporate executive would be spending someone else’s money for a general social interest.”

In a free society, Friedman argues, “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits, so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” In other words, an executive’s duty to his employers—the company’s owners—trumps all other moral or ethical considerations, and obliges him to ignore the impact of the company’s decisions on other interested parties, or the external environment.

Under this view, a corporation that uses child labor in its overseas factories has no obligation to consider the welfare of those children. After all, child labor is legal in many Asian markets, and by taking advantage of that fact, corporations can produce goods at lower cost and thus increase the return to their shareholders.

In this instance, the only argument that might cause a company to refuse to use child labor is a public relations argument: that over time the long-term damage to the company’s reputation among other stakeholder groups—customers, and perhaps also employees—might ultimately cost shareholders more than they are saving in the short-term by exploiting Asian preteens. The possibility that consumer pressure could force legislative or regulatory change—labeling, for example—might outweigh any competitive advantage gained from cheap labor.

But that’s a view that denies non-shareholders any rights of their own. Their interests of to be consideration only insofar as they have the power to hurt the shareholders, whose interests are paramount. So the fact that children in Africa might die from malnutrition as a result of drinking infant formula would be irrelevant, from an ethical perspective. The fact that protestors might then boycott the company, reducing sales and thus reducing shareholder value, would be the only legitimate consideration. In this view, if a company knew for certain it could sell infant formula in developing countries, killing infants, without fear of discovery or retaliation, it would be perfectly ethical to do so.

This faith in the “invisible hand” of the market substitutes dogma for ethical thought. Most people—even, one suspects, most businesspeople—would agree that ethical decision making, in business as in other realms, requires serious consideration of the consequences of the decision on all interested parties. And it requires a framework for making those decisions.

Two major ethical philosophies dominate the current literature: deontology and utilitarianism. Deontology focuses on universal statements of right and wrong, emphasizing the duties and rights of individual, based on Immanuel Kant’s categorical imperative, which states, “One ought never to act unless one is willing to have the maxim upon which acts become universal law.” Thus, one should not lie unless one is willing to live in a world in which everyone is free to lie.

Utilitarianism, on the other hand, focuses on the consequences of an action to determine whether it is ethical, using a formula often summarized as “the greatest good of the greatest number.” A utilitarian is obliged to perform what amounts to a social cost-benefit analysis of each action and measure the social and economic benefits to all the affected parties.

There are objections to both schools of thought.

For example, a deontologist might arrive at the conclusion that it is never ethical to sell products that have not been adequately safety-tested, or that might be harmful to some consumers. But it is not difficult to envisage a circumstance—in the case of an experimental treatment for a fatal disease such as AIDS, for example—in which it might be preferable to get a product to those who need it even without a thorough understanding of the long-term side-effects.

On the other hand, a utilitarian might look at a highly flammable toy that proves dangerous a tiny percentage of users but argue that the benefits it provides—employment for those who manufacture and market it, profits for shareholders, pleasure for those who use it without incident—outweighs the risk, even if the risk occasionally proves fatal.

Indeed, business advocates have often made the case that this kind of cost-benefit analysis is a legitimate tool through which to determine how far companies should go to make their products safe. In recent years, risk management experts have argued that increased regulation designed to save lives by protecting people from unsafe products, for example, may in fact cost lives.

The late Aaron Wildavsky, a political theorist at the University of California in Berkeley, argued that regulation can maim or kill by slowing economic growth, which in turn depresses the national standard of living and therefore the health of the population. Economists have even created models that purport to prove that one person will die for every $1.9 million to $7.5 million in regulatory costs imposed on industry. If that model is accurate, spending billions to remove asbestos from building might cost lives rather than saving them.

Of course, such analysis measures only the economic costs and benefits. Social benefits often prove more difficult to assess. Says Howell Raines, editor of The New York Times, “Risk is not just about statistical threat to health and life. Risk is also about the kind of society you want to have.”

It should be clear from this that there are no easy answers to many of the big ethical questions business leaders face. There are no obvious deontological rules that provide satisfactory guidance for every eventuality, and utilitarian analysis can lead to an almost infinite regression of cost-benefit analysis as executives attempt to decide—in an admittedly hyperbolic example—whether 10,000 jobs at a factory in Iowa are worth more than one dead African infant.

But perhaps public relations can provide a framework for making these decisions. If the majority of corporate executives are ill equipped to make complex ethical judgments, perhaps they should defer to the judgment of society—applying community standards in place of their own, allowing themselves to be guided by their constituents.

Lawyers are trained to ask, “Is it legal?” But public relations people are trained to ask a more complex question: “How will this be regarded by our stakeholders?”

That may not be precisely the right question to ask when assessing whether a course of action is ethical, but it’s not a bad question to start with. By considering the likely reaction of employees, customers, communities, regulators and the media—and shareholders, as part of the equation but not to the exclusion of all others—companies can get a handle on whether that action is appropriate.

Ethicist Laura Nash of Harvard Business School argues that one component of ethical decision making involves asking how you would define the problem “if you stood on the other side of the fence.” Says Nash, “There is a power in self-examination: with an exploration of the likely consequences of a proposal, taken from the viewpoint of those who do not immediately benefit, comes a discomfort or an embarrassment that rises in proportion to the degree of the likely injury.”

Nash also suggests asking, “Could you disclosure without qualm your decision or action to your boss, your CEO, the board of directors, your family, or society as a whole?”

Says Nash, “The old question ‘Would you want your decision to appear on the front page of The New York Times?’ still holds. A corporation may maintain there’s really no problem, but a survey of how many ‘trivial’ actions it is reluctant to disclose might be interesting. Disclosure is a way of sounding those submarine depths of conscience and searching out loyalty.”

It is easy to see how these two components of ethical decision making related to the public relations profession. If public relations people are doing their jobs, they will understand better than anyone else within the organization how policies are likely to be viewed by internal and external audiences, and they will be able to assess just how damaging a story on the front page of The New York Times could be.

For public relations people to play a leadership role in ethics, however, they need to convince management of two things: first, that in this age of transparency stakeholders inside and outside the corporation will inevitably learn of the truth about a company’s actions sooner or later; and second, that once they do they will demand complete honesty—stonewalling and dissembling will not be tolerated.

Moreover, public relations must be understood to be first, a discipline that encompasses all of an company’s stakeholder groups—customers, employees, shareholders, communities, and suppliers; second, a discipline that is about dialogue rather than monologue, about listening as well as talking; and third, a discipline with input into the policy-making process, not as a tool for explaining—or, worse, spinning—decisions after they have been implemented.

The first is important, because if corporations are to be seen to act ethically, they must treat all people equally, balancing the interests of employees with the interests of shareholders, for example. That means public relations people need to understand all of those stakeholder groups, their expectations and their values.

The second is important, because public relations people must have the necessary intelligence and insight to interpret stakeholder reaction accurately.

And the third is vital, because public relations cannot play any role in ethics as long as it is seen as part of the ethical problem, as long as “public relations” is seen as the opposite of substantive change. The reaction to The Wall Street Journal article cited at the top of this article is not atypical, and not unjustified. Too often, public relations has an instrument for selling corporate decisions, rather than a process that helps companies arrive at the right decision.

To take a leadership role at a time when leadership is so sorely needed, public relations must prove itself at the highest level.

According to Jack Martin, president of Texas public affairs firm Public Strategies, “It is worth considering how different things might have been if corporate boards had been required to think of the true interests of the public: their employees, the consumers of their products and everyday investors looking for financial security.

“Corporations need to do more than simply address public concerns. The presence of the public needs to be felt in the boardroom alongside the financial, legal, accounting and management considerations when bottom-line issues are discussed. Corporate leaders must acknowledge that their actions affect people’s lives in dramatic ways, and they should show concern for those end results. Corporations should have best practices for recognizing the interests of the public specifically written into their corporate bylaws.”


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