Business ethics belong to company

Sister Doris Gormley is director of corporate social responsibility for The Sisters of St. Francis of Philadelphia. Reviewing the convent’s investment portfolio, she discovered that no women or minorities sit on the board of directors at Cypress Semiconductor Corporation in Silicon Valley, Calif. She sent Cypress CEO T.J. Rodgers a letter asserting that the company’s board ought to reflect “the equality of the sexes, races and ethnic groups.” She could not have chosen a better time. Rodgers already intended to write an article criticizing recently fashionable assumptions about “corporate social responsibility.” Gormley’s letter inspired him to put his thoughts into a six-page rebuttal, which he sent not only to her, but also to his company’s shareholders.
On its face, “corporate responsibility” looks like an unassailable and high-minded ideal. Moral principles, however, are almost never as indisputable as they might first appear. No one has a corner on ethical propriety — not even a nun. Rodgers points out that Gormley’s diversity requirement for corporate boards is merely one of countless pet issues championed by dozens of special interest groups. Furthermore, many of these issues contradict one another. It would be impossible for Cypress to embrace all the tenets promoted by these self-appointed corporate watch dogs even if it wanted to. Still, Rodgers makes no apologies. “Choosing a board of directors based on race and gender is a lousy way to run a company,” he writes. “A woman’s view on how to run our semiconductor company does not help us, unless that woman has an advanced technical degree and experience as a CEO.”
Because of intense competition in the semiconductor industry, Cypress demands that its board members have the kind of management experience — in specific areas of technology — that takes decades to acquire. Most people who qualify earned Masters degrees in an engineering science before climbing to the top management position in a technology company. Rodgers points out that few women and minorities qualify because engineering graduate students 30 years ago were practically all white males. He predicts that in 10 years a different picture will emerge because of the greater diversification of graduate students. He also makes clear that there is nothing aside from these criteria that bars anyone, regardless of race or gender, from a position on the board. “We would quickly embrace the opportunity to include any woman or minority person who could help us as a director,” he writes, “because we pursue talent — and we don’t care in what package that talent comes.”
Rodgers wins the moral argument hands down. Simplistic moral platitudes are seldom as universally applicable as their proponents would like to believe. Gormley’s letter implies that a CEO cannot run a company morally without complying with her assertions about board diversity. Blinded by a conceit endemic in moral crusaders, Gormley fails to recognize not only that her pet issue is merely one of many arbitrarily promoted by special interests, but also that it leaves lots of room for debate. She no doubt feels that the lack of opportunities that existed for women and minorities in the past justifies turning the tables today. It is just as plausible that what we should have learned from the moral failings of our predecessors is that discrimination is wrong. Period.
More practically, if Cypress compromised its competitiveness by putting race and gender ahead of meaningful criteria in its requirements for potential directors, it would be unfair to shareholders who disagree with her opinion.
If Gormley could see beyond her dogmatic assumptions of what constitutes responsible behavior she would realize that, contrary to her judgment, Cypress is indeed a socially responsible corporation. Rodgers said the company supports the largest food bank in the United States and gives to a nearby public hospital. Its employees are paid well and receive stock options every year. The employees also participate in a generous profit-sharing plan. Cypress covers the cost if its employees want to go back to school. If any employee wants to buy a home computer, Cypress will pay for half the cost. Rodgers points out that not all companies can afford to be this generous. “Other companies, perhaps in older industries just trying to hold on to jobs, might find the choices our company makes devastating to their business and, consequently, their employees. No one set of choices could be correct for all companies.”
This is why Rodgers is seriously bugged by recent government threats to legislate arbitrary notions of corporate morality. “The ‘corporate responsibility’ concepts … make great TV sound bites,” he warns, “but if they were put into practice, it would be a disaster for American business.”
Rodgers is right. Not all companies are competitive enough or can afford to comply with a list of government mandates, no matter how nice they sound. There is also a deeper reason that Rodgers resents this kind of government intrusion. “Cypress stands for personal and economic freedom,” he writes, “for free minds and free markets, a position irrevocably in opposition to the immoral attempt by coercive utopians to mandate even more government control over America’s economy.”
In other words, it would be no less autocratic — not to mention repressive — for the government to regulate business ethics than if it were to impose, say, Christian morality on individual citizens. Most Americans would rightly resent such government encroachment into their personal lives. The government cannot possibly know the correct morality for each company any more than it knows what is best for every individual. The same is true of well-meaning shareholders trying to further their social agendas. After all, Gormley didn’t know whether any women or minorities even qualified to sit on the board at Cypress. Unable to look beyond her single-issue litmus test, she also managed to overlook an impressive list of reasons why Cypress is an exceptionally ethical company. Clearly, the people most qualified to decide a company’s ethical values are the people who run the company.
Charles Foster’s column appears every other Monday in the Daily.