Corporate responsibility – The potential of power

By Jonathan Sacks

One of my favourite Jewish stories is about the rabbi who spent a year trying to teach the book of Joshua to an unruly class. At the end of the year, he decided to make his questions easy. ‘Marvin', he said, ‘tell me who destroyed the walls of Jericho?' ‘Please sir', replied Marvin, ‘it wasn't me.'

Scandalised, he wrote a letter to Marvin's parents. ‘I've spent an entire year trying to teach Bible to your son, and when I asked him who destroyed the walls of Jericho, he replied: Please sir, it wasn't me.' Two days later, he received an indignant letter in return. ‘Dear Rabbi, if our son says it wasn't him, then it wasn't him!'

In despair, the Rabbi went to the president of the congregation and told him the story. The president got out his cheque-book and said, ‘Here's a cheque for $1000. Get the walls repaired, and stop complaining!'

Corporate responsibility can all too often hide under the excuse: ‘Please sir, it wasn't me.' After all, as Milton Friedman and others argue, corporations have a responsibility to shareholders to maximise profits. They can claim that all else - rights of employees and consumers, advertising ethics, pricing, environmental issues, community considerations, general levels of employment - is the responsibility of governments or international agencies. Or it may be no one's responsibility; it's just how the market decides. Besides which, a corporation is an impersonal abstraction. Who, in a large firm, is responsible for a particular decision? It is all too easy to delegate blame away.

Today corporations wield immense power, larger, in some cases, than entire nations. The international corporation is increasingly calling into question the concept of national sovereignty. By transferring production to other countries, a corporation can evade local legislation. By outsourcing many of its operations, it can escape accountability. Despite all the excuses, however, one principle remains: With power comes responsibility.

Judaism cannot accept the principle that markets, business, and corporations are a value-free zone. They are major features of our social environment, and the biblical concept of covenant tells us that we are severally and collectively responsible for the environment we shape and share. No one articulated this idea with more passion than the prophets of ancient Israel. Here is Amos on the subject:

Hear this, you who trample the needy
and do away with the poor of the land . . .
skimping the measure,
boosting the price
and cheating with dishonest scales . . . (Amos 8: 4-5)

And here Isaiah:

Your silver has become dross,
your choice wine is diluted with water.
Your rulers are rebels,
companions of thieves;
they all love bribes
and chase after gifts. (Isaiah 1: 22-23)

It would be wrong to search within Judaism for precise ethical guidelines. Judaism is about rules that are eternal. Business practices, by contrast, are constantly changing. Yet there are certain orienting principles.

Employees must be treated with dignity. The formative experience of the children of Israel was slavery in Egypt, and we are commanded not to inflict what our ancestors suffered. Marcus Sieff, in his autobiography Don't Ask the Price, tells of a food factory with which Marks & Spencer's did business. The area where their products were prepared was clean, but conditions for the workers were bad: ‘Walls ran with moisture, the men's cloakrooms and lavatories were dirty and dilapidated, in fact Dickensian.' Sieff told the owners to make improvements. They didn't. He told them that he could no longer do business with them. They were incredulous: ‘We are one of your biggest suppliers', they said. Sieff was not bluffing. The next week they ceased trading with the company, which soon collapsed and was taken over.

Customers, too, must be treated with respect. There are laws in Judaism against overpricing, false description of goods and misleading advertising. Sieff again: ‘Members of our board, senior executives and their families regularly ate at home the foodstuffs we sold; we believed if the food wasn't good enough for us and our families then it wasn't good enough for anybody - certainly not for our customers. We applied the same principle to our clothing and other departments, and do so to this day.'

There is responsibility to the local community. One example has become famous. Aaron Feuerstein owned one of the last textile mills in Massachusetts. Over the years, companies had transferred their production to countries with lower wage rates. In the winter of 1995, Feuerstein's mill was destroyed by fire. He was 70 years old at the time. Everyone expected him to collect the insurance and retire. Instead, he gathered the workers together and told them that he was going to rebuild the mill. In the meantime, their salaries and health insurance would be paid in full.

Feuerstein, a deeply religious Jew, explained: ‘You are not permitted to oppress the working man, because he's poor and he's needy.' He knew the closure of the mill would have a devastating effect on an already depressed town. He lost a great deal of money on the decision, but he gained what the rabbis called ‘the crown of a good name'. Was he right or wrong? In strictly economic terms, he was wrong; but can you analyse a life in strictly economic terms?

At the end of the day, business is a moral enterprise. It was Adam Smith's great insight to see that the market - by what he called an ‘invisible hand' - was able to transform self-interest into collective gain. David Ricardo - through his ‘law of comparative advantage' - showed how, by specialization, we generate economic growth. Just as we expect the best from our teachers and nurses, so we have a right to expect the best from the management of our large corporations. The idea that we can insulate ourselves from the consequences of our decisions is unsustainable and unethical.

Business is not just about maximizing profits, because life is not just about maximizing profits (the American bumper sticker, ‘The guy with the most toys when he dies, wins', is surely one of the saddest statements ever of the human condition). It is ultimately about enhancing lives: of customers, employees, communities. The best business people I know have an acute moral sense. They are tough, cautious, determined and, yes, sometimes ruthless, but also moral. They would not have survived in the long run otherwise.

Behind these principles is sound common sense. Integrity counts in the long run. Treating employees well means that they develop a loyalty to the company and give more than they otherwise would do. Cutting corners may create short-term advantages, but they will invariably be discovered in the long run. How many careers have been destroyed by those who thought they could get away with it? Trust, once lost, is hard to regain. A reputation damaged is never quite the same again.
In his A History of the Jews (p. 248) Paul Johnson writes:

The willingness to face the idea of money squarely, to deal with it honestly and rationally, had deep roots in both biblical and rabbinic Judaism. Judaism did not polarize piety and prosperity. It praised the poor, it deplored avarice, but it also constantly suggested links between the good things of life and moral worthiness.

In the end, we return to the wisdom of Hillel: ‘If I am not for myself, who will be? But if I am only for myself, what am I?' We are individuals with rights, but we are also embedded in networks of relationships which impose responsibilities. And the greater the power, the greater the responsibility.