Overcome ethical and moral slackness

"Wall Street knows only two emotions, greed and fear." I remember being told by an investment banker during that peak of "irrational exuberance" that became the dotcom boom and crash half a decade or so ago.

All of us remember the casualties of that time among our friends, contacts and business partners. No doubt, we remember the pontificating of bright young things who told us that profit, PE ratios, even the price of a barrel of oil no longer mattered.

This was the New Economy, new paradigms, where "eye balls and stickiness" were king, where a company with no track record, no management team to speak of could squander its investors money as if this "burn rate" would lead to ever great future successes.

I am often reminded of those days today where I see so much exuberance in the capital markets across the Gulf, when I see vastly oversubscribed IPOs for businesses that have no history, no business plan apart from an enthusiastic memorandum suggesting that it will be the premier entity in its field across the Middle East.

Often the parallels with what we see today compared to that early time are frightening and breathtakingly similar.

Though, of course, my banker friends today remind me that this time it is really different because of the price of oil and because of all the infrastructure investment. I am sure they are right.

However, I wonder whether we will see another parallel, and that is the erosion of ethics and common sense morality in business.

The corporate scandals of Enron and Tyco, as we know, were only the tip of the iceberg and were no doubt a mirror of what else that was happening in society.

Sustainable enterprises

A society that becomes used to making money simply by investment and speculation develops into a society that becomes blind to all other values in life, as well as one that will see all manner of shades of grey and trade offs to justify the end return.

That society will forget to produce and build sustainable long-term enterprises that are capable of surviving more than one economic cycle.

It is perhaps for a moment worth examining the role of a business enterprise in society. Some like Peter Drucker, would argue that it is to serve a customer, others like Milton Freedman perhaps would argue that it is an entity purely by which to make profit.

Both ideas are of course valid but I think not without the notion that a company is there to contribute to the healthy functioning of society, by providing services and products that are useful and by acting in a way that is morally decent, and even morally courageous.

There can be no benefit in an enterprise or an individual acquiring great wealth if all around there is poverty, misery or exploitation.

Wealth acquired at the expense of others can only lead to social divisions, resentment and instability. The study of any revolution in history will chillingly prove the point.

This is not to say that earning great wealth is unjust in itself. Many may resent Microsoft for its powerful position in its field of activity, but few can argue against the $2 billion a year earned by its founder, Bill Gates.

Especially when seen in the light of the economic performance of Microsoft, the usefulness of his company's products, the wealth creation for his employees (when stock options are factored in then one-in-five of his employees are dollar millionaires), and indeed his philanthropic activities.

The way we run our businesses is a reflection of our contribution to society, a reflection of the society that we participate in creating.

And it is perhaps timely to remind ourselves of this when business is so good for so many of us and to express the hope and desire that we will have the wisdom to escape the excesses of greed and the moral and ethical slackness that ensue.

The writer is the managing director of Korn/Ferry International in the Middle East.