Corporate Ethics: An Oxymoron
The Federal Home Loan Mortgage Corporation.
November 26, 2003
WASHINGTON (Reuters) - Freddie Mac on Friday revealed, for the first time, the details of its earnings manipulations in recent years... the long-awaited numbers from the accounting scandal included an admission that the No. 2 mortgage finance company overstated earnings by almost $1 billion in 2001 and understated profit for 2002, 2000 and earlier periods by more than $6 billion.Twenty-five years ago, as a member of a Board of Pensions for a non-profit, I was discussing ethical investments with one of our constituents. He was troubled by some of our investments—for example, in a company that marketed baby formula in the third world, where there was no clean water with which to mix it. I asked him what would be an ethical investment. He looked thoughtful, then ventured “home mortgages.” I’m afraid I laughed, because at the time interest rates on home morgages were unethically high and most homes were overvalued to boot. Several of my generation became well-to-do on the basis of their home mortgages, if they bought before the boom; some who bought during the boom took a bath. I was never a home-owner; only an observer, but I remembered my laughter as I read the report on Freddie Mac.
"Freddie Mac" sounds like the name of a chain that sells clothes for little boys, but it's a cutesy nickname for a very serious business, the Federal Home Loan Mortgage Corporation,which was chartered by the Federal government. The first stated purpose in the chartering Act is “to provide stability in the secondary market for residential mortgages.” Other noble purposes follow, but this one is enough to point out that books juggled to the tune of $6 billion dollars in less than a decade have nothing to do with stability.
Freddie Mac joins Enron and WorldCom, among others, in a dismal record of deceit and/or incredible incompetence. It led me to speculate on why this is a pattern, and I’ve come up with a hypothesis: *Corporate ethics* is an oxymoron.
Ethics is the product of a trained conscience, which is personal and individual. Corporations do not have consciences. They may have codes, even “codes of ethics,” or “ethical guidelines,” but not consciences. They cannot have as their overriding principle “doing the right thing” because corporate goals, looking to the bottom line, are written in the light of doing the permissible thing. Any corporate ethical code is subservient to corporate goals.
No single conscience is powerful enough to make a difference, so people go along to get along. Once in a while, a whistle-blower arises, often at great personal sacrifice. The whistle-blower exists because the corporation as such has no conscience to monitor its “code of ethics.”
There are two exceptions to my hypothesis, but they are of the “passing through the eye of a needle” sort:
About the Author:
Barnabas has nothing to be self-righteous about, and especially doesn't care for self-righteousness that is funded with stolen money.
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