Conversation with Joseph and Edna Josephson Institute of Ethics’ Michael Josephson

Founder and President of the Joseph and Edna Josephson Institute of Ethics and the CHARACTER COUNTS! Coalition

The purpose of business is to make a profit, but do it with honor. It’s to find a way to make a living that does credit to your life.

Michael Josephson is one of the nation’s most sought-after ethicists. He regularly conducts training programs in ethics for leaders in business, law, government, the military, law enforcement, education and the non-profit community. Many readers in Southern California have heard his regular commentaries on KNX radio. He was formerly a law professor and the owner of a well-known bar-review course.

Mr. Josephson founded the Josephson Institute, named after his parents, in 1985 after he sold his business. The Character Counts! Coalition is a partnership of hundreds of communities, schools and other educational and youth-service organizations. It provides character-building curricula and programs based on six core ethical values: trustworthiness, respect, responsibility, fairness, caring and citizenship. The third week in October has been designated National “CHARACTER COUNTS! Week.”

Linnea McCord, Associate Professor of Business Law at the Graziadio School, and co-author of the article on workplace bullying in this issue of GBR, recently had the opportunity to talk with Mr. Josephson about ethics and business.

Michael Josephson
Michael Josephson

GBR: For the past fifteen years or so your professional focus has been on encouraging and emphasizing ethical behavior — in schools, in the workplace, and in the public at large. What was it that persuaded you that this was an area that needed this kind of focus and attention?

Josephson: Well, I really got into it in a different setting. I had been a law professor for almost twenty years when I was assigned to teach the ethics course in 1976. That was shortly after Watergate. There were twenty-one lawyers involved in the Watergate scandal, so the American Bar Association sort of had this “Where did we go wrong?” question. They said, “I know. These guys didn’t have a course in ethics,”– like they wouldn’t know not to lie if they didn’t have a course in ethics. But, in any event, the Bar created a mandatory ethics course. There weren’t enough teachers who volunteered, so we were assigned to teach it. My turn came in 1976. Coincidentally, that was the same year I became a father for the first time. Those two things conjoined to focus me on the way that I was teaching ethics, thinking about ethics, and the way I taught generally.

The course I was assigned to teach really had nothing to do with ethics initially. There was a whole range of things that are called “lawyer ethics” that had to be included — conflict of interest, not co-mingling funds, and not advertising, things like that. But they had nothing to do with decency or how one human being treats another. That discrepancy led me to become increasingly proactive at trying to figure out a way to actually integrate real ethics into the law school curriculum, things like not being arrogant, not being deceptive, not being brutal. These are all things that I struggle with in my own life to some extent because of my natural predisposition and competitive training.

So that’s what brought me into it. It wasn’t any particular thing I had seen in the workplace, although it wasn’t hard — once I focused — to see the problems.

GBR: But why did you decide to set up the Institute? What was its purpose?

Josephson: To make the world better for my kids. It really was that simple. And maybe it was to vindicate my own life to some extent. It was a situation that said “If not me, who?”

GBR: Much of the Institute’s work now has to do with children and youth. Did you start with that idea and then move into workplace concerns?

Josephson: Quite the other way. When I formed the institute I had no intention whatsoever of getting involved with youth. My goal was to try to teach people in the law and business. Then I quickly got into the non-profit community, which I hadn’t even been very much aware of, and then I said “Wow, there’s a whole other group out there in government.” So basically the focus was on the workplace and people who are professionals. It was to try to help them become more sensitive to the ways in which they are making decisions every day that have significant ethical impact on themselves and on society.

In 1990 somebody gave us a very small grant to hire some summer associates, One of the research projects was “What are the ethics of the American youth?” I wanted that to be more of a Workforce 2000 issue. I said, “If we were going to do all this work with companies, we ought to tell them what the future workforce looks like in terms of ethics.”

That study convinced me that there was a measurable erosion of values. Up until that then I was somewhat skeptical about the claim that there had been an erosion of values among young people. I was not happy with the way things were, but I figured I was just getting older, and every generation seems to say, “Why can’t kids be more like us?” But when we started to look at the data on theft, on teenage pregnancy, on shooting, and all the different markers we could find, there was a measurable, noticeable erosion. And when one began to talk to young people about values, there was a casualness about not having good values that I wasn’t used to. It’s not like I grew up in a naive situation. I knew kids who cheated. But the casualness with which this kind of misbehavior would be described and handled surprised me. To me it said that adults have been seriously failing in our responsibility to deal with inculcating a set of values in young people that gives them a moral compass that makes sense.

GBR: As you looked at the workplace and at education, was there any particular thing that really struck you?

Josephson: One thing I came to realize was how much I had been — and I think others had been — rationalizing, explaining away behaviors that really have no justification other than the fact that we do them, and we want to justify them. In a rational decision, the reasoning takes place first and leads to a conclusion. You haven’t pre-determined what you’re going to do. Rationalization occurs when you already know what you’re going do, or you’ve already done it. Your case is already established and you’re inventing — and, in most cases, genuinely inventing — reasons that might sound good. And that is essentially dishonest.

Rationalization also shields us from acknowledging the amount of work we have to do to be better people. I frequently use the phrase, “You don’t have to be sick to get better.” I use it to remind the people I talk to that I’m not saying, “You’re an evil person.” But we can all do better. I thought about that as I was driving in this morning. I knew I was late — and I know why I was late — and it is not consistent with my notion of how I ought to behave, but I don’t always meet my own expectations. That’s the struggle. It is important to try to have clarity on your expectations, not beat yourself up unduly so that you become immobile, but at the same time to say you know that it wasn’t a good thing.

GBR: Is it difficult to create a truly ethical business environment and still have a focus on profitability?

Josephson: The way I like to look at it is analogous to sports. The purpose of sports is to win, but — at least at its best — it is to win with honor. The purpose of business is to make a profit, but do it with honor. It’s to find a way to make a living that does credit to your life. Whether you are a laborer or whether you’re a commodities trader, the idea is that you should not be making a living, in my opinion, in any way that demeans society or yourself. When we start interpreting work to mean simply making money, then we forget that what we do in our work is, maybe more than anything else we do, making our lives. We normally devote the highest portion of our waking hours to our jobs. I believe there can be some jobs that probably by nature don’t have big intrinsic value, but that person can still interact with people in a positive way and play a positive role in society.

GBR: Many people will say that manager has a fiduciary responsibility to his or her shareholders to maximize shareholder value. Would you accept that as the purpose of being in business?

Josephson: No, not if maximizing shareholder value is done at the cost of some other values. I think the idea is that one has, among other responsibilities, the responsibility to try to increase shareholder value. But when you say “maximize,” you’re now saying it’s my priority at the cost of all others. And that’s what I will not acknowledge — any more than I would go the other way and say my purpose is to maximize the happiness of my employees. I don’t think that’s fair either. There are shareholders and stakeholders beyond employees.

I think that what is critical to me is that they be balanced. Whenever any single stakeholder says “All I care about is what’s in it for me,” it is essentially destructive of the spirit, and ultimately I think it is probably self-destructive in terms of not being the kind of thing that generates trust and sustainability. The expression that the purpose of business is to make a profit is, I think, an oversimplification. Clearly a business must make a profit in order to survive. Bringing in more money than you spend is critical to that. But to separate the purpose of business from the purpose of people who are in business is, I think, not a good thing.

GBR: What do you think are the most difficult ethical problems that you’ve seen in the workplace?

Josephson: Let me categorize them in terms of the six pillars of character that we use in CHARACTER COUNTS! These are all areas in which ethical problems can occur.

The first major category is trustworthiness. I would say the problems I see the most frequently are trustworthiness issues. That includes not keeping promises, out-and-out lying, deception, sometimes a lack of candor — but all are issues of integrity.

The second major area has to do with respect. And that’s where your workplace bully issues come in. Respect has to do with how we’re viewing other human beings. And there’s something about the workplace, when it gets very task-oriented, that works against respect. I think people sometimes feel that their job is just to make money, to keep the schedule running on time, to get this project out, whatever it is. But if it is done in a way that doesn’t take others into account, it is not respectful, and that’s wrong. That’s a personal challenge for me. I’m very task-oriented, and it’s very easy for me to be self-righteous, or to rationalize, because my tasks are publicly-oriented. So every time I have a task I say, “Yeah, but we are just trying to help more people.” At the same time, if criticisms are leveled at me, it is that I may push people too hard. And I understand. There’s an arena for conflict and disagreement on what is respectful. I think I’m always being respectful, but it can get problematic. At any rate, respect is a huge issue.

Responsibility in the workplace is a significant one, and I think the primary responsibility that I see being avoided is often just the responsibility to make a decision. People put things off, hope things go away. As a result, they’re not meeting their responsibility. It’s their job to make the call. I think that’s another huge one.

Fairness is one of the softer ethical issues. And I say “softer” only because it sometimes is less clear. You know what a lie is, and abusive conduct is fairly easy to identify. But fairness is almost always a matter of interpretation, so dealing with it is more a function of consistency and impartiality. The interesting thing, though, is that if you were to ask the employees what the biggest problem in the workforce is, most would say it’s unfairness. So for me, defining the criteria and applying them equally is very important.

Caring is our fifth principle. It’s an issue that many, many organizations don’t even think is appropriate to consider. Some people think it makes you soft or it makes you weak. What I try to stress is that a really caring company or organization still does what it needs to do, but it does it in a way that’s more sensitive. You know, maybe I do have to evict everybody in this building. It’s a legitimate thing. I bought the building. But how I clear the people out and when is important. Caring is not always about what you do as much as it is how you do it, especially in the workforce.

And the final one is citizenship. That has to do with following the rules. Some people are willing to work around the rules. They see nothing wrong with it unless you get caught. An awful lot of companies or organizations seem to function on that level.

Every workplace has a little bit of a different formula on those six, but I always try to use those lenses, these six pillars as a screen. And it’s important to use all six, because I think one of the problems is the tendency to focus on one or two of them and to forget they’re all important. It’s like the legs of a stool. If they’re not even, and they’re not equally strong, it’s an unstable stool. There needs to be balance.

GBR: The reason why companies make some of the decisions that they make — such as laying people off as a first resort — is because it’s a way they can affect the stock prices, and compensation packages are tied to that. Is that a moral issue or a conflict of interest?

Josephson: I certainly believe there’s a huge conflict of interest regarding management and stock prices today. It’s like coaches who know that if the team doesn’t win, they’re going to get fired. In that situation you tend to do whatever you think you have to do to win those games. You would rather not do certain things sometimes, but you do it. And I think it’s the same with business. A business person who does not hit goals – and making profits is again too simplistic because there are many kinds of measurable goals — is in a vulnerable position. I think in the last analysis, though, you have to step back and say, “What are these people about, personally? What is the organization encouraging or improving?”

GBR: When you say vulnerability, what do you mean? Vulnerability to what?

Josephson: Vulnerability to unethical conduct and therefore the consequences of unethical conduct. Companies who engage in this conduct normally pay a price one way or another. For one thing, there’s a kill the messenger syndrome. Most managers will say they distort or conceal information. They give the boss what the boss wants to hear. Most employees will say they have a low level of confidence in the accuracy of their company’s internal reports because they tend to be self-serving.

The simplest example is so self-evident it’s become a parody of itself: the budgeting process. Everybody lies and plays games on the budget. I ask for more than I need because I know you’re going to take away what you think I don’t need, but you will start with my figures, and it all becomes a game where integrity is not even on the table. Nobody feels guilty about lying on his or her budget. When I say I need $50,000 for this thing when I know I don’t, but I think you’re going to cut it down to $40,000 anyway, it’s an ethical issue.

GBR: So, does it get back to the person at the top of the organization being responsible for setting the ethical terms?

Josephson: You know, I wish I thought it was that simple. The person at the top has the most power to change things. But he or she deals with many, many pressures as well. The people who are at the top of the organization have boards of directors and shareholders that apply pressure, and if everyone’s out for himself or herself, it’s very hard to be the person trying to steer the ship in an ethical direction. So I think we over-simplify by saying that if the top manager really wanted to, he could change the culture of the organization. I believe it’s worth doing. I think, yes, you can have an impact on it. But I think you’re underestimating the pressures and the tension if you just say that the person at the top is responsible. There are so many people that don’t want to change, and they will generate a lot of pressure. Organizations know how to eliminate reformers.

GBR: So what you’re saying then, is that if change is going to occur in the business community, there’s got to be change in society at large first?

Josephson: No, I won’t say that because I will never say, “I can’t make a difference.” That’s what everybody uses as the excuse. I would simply say that the two are very closely related. I think individuals always have the responsibility to make the moral judgment, and even pay the cost sometimes. If enough individuals do that, society will change. But society’s not going to change first, because society is only a collective expression of what thousands or millions of people are doing.

Therefore, for me, it all starts with the individual’s action. So I will be sympathetic, and say, “You’re right, it isn’t that easy,” and what I’m asking may take moral courage. You might be putting yourself at risk to do this, but you still need to do it. That’s my message.

Author of the article
Linnea B. McCord, JD, MBA,
Linnea B. McCord, JD, MBA,, , Associate Professor of Business Law at the Graziadio School of Business and Management, Pepperdine University. Dr. McCord started teaching business law and ethics more than 30 years ago, first as an in-house corporate counsel and later as the General Counsel of a division that was part of a high-tech Fortune 500 multinational corporation, headquartered in New York and Paris. Her area of expertise is the critical role Rule of Law plays in the long-term success of economies and countries and why American Rule of Law is unique in the world.
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