Disclaimer: the opinions and viewpoints expressed in this article are those of the author and do not necessarily reflect the opinions or viewpoints of the management or editors of ethisphere.
Like many CEOs, I am skeptical of government action. It’s often uninformed, expensive, and even pernicious. I think, therefore, that we business leaders have a special obligation to help cure society’s ills.
Some CEOs shirk that obligation. In my experience, their defense is that they do not want to be associated with controversy. The problem is, many social ills are a source of profit to some group, and naturally, that group resists change to the status quo. Therefore, all positive social action is going to be controver-sial to someone. Instead, in trying to cause offense to no one, CEOs spend their influence on less important causes. Donating shareholders’ money to a local symphony-that’s not my idea of ethical action. How much better to give away one’s own wealth to bring attention to a social problem-even if it is a controversial one?
Twenty years ago, I was a student of development economics and spent a fair bit of time in developing countries. I gradually came to the realization that development theory was overly complex, and that development really came down to two issues: a good system of education and a properly functioning capital market operating under the rule of law. A good educational system builds human skills, which, when combined with capital, naturally brings about development.
Ironically enough, here I am 20 years later, still fighting to make a difference on the same two issues, trying to reform an abject and failing government school system and a corrupt capital market. The troubled country at issue, however, is our own.
The results of our low-performing, government-run school system are plain to most CEOs. Our high school students rank far below average among OECD countries. No longer can an employer count on a high school graduate having basic math and reading skills, and in our company we spend a fair bit of money providing what is, in effect, remedial education. Most CEOs I speak with privately share my sense that the solution to fixing our government school system is the same as it would be to fix a government-run chain of butcher shops-we need to ask whether the government has some special edge in producing this good. The answer is no, but because of the power and reach of the guild involved in producing education, few dare to challenge it publicly.
Similarly, many hesitate to challenge the problems in our capital market. The roots of these problems are deep. The profits of the financial industry now total between 30 and 40% of total corporate profits. Think of that: the industry is tak-ing up to 40% of profits just for moving capital around among the other industries! As is now being exposed, they have rigged the system so that one can no longer assume the simple precepts of a good capital market, such as a properly functioning settlement system. Try to bring attention to this issue, and what do you get? Derision and retaliation from the industry and often from the SEC, which has become a handmaiden of Wall Street. Rather than standing up to their pressure and arguing for capital mar-ket reform, CEOs have been cowards. Let’s remember Churchill’s dictum: an appeaser is one who feeds a crocodile, hoping it will eat him last.
Education and capital market reform are my two issues. Others may care more deeply about other issues. But I encourage all to conquer their fear of offending someone by taking a stand, even on a controversial issue. I urge my col-leagues not to waste the unique opportunity that their current position affords while bemoaning the inefficiency of gov-ernment action. Instead, they should take advantage of their position to bring about positive change in the world. That’s what I call ethics in action.
Patrick Byrne is the CEO of Overstock.com
