Corporate Crime and the Ethical Slide

Johnson & Johnson’s code of ethics is chiseled in a six ton stone that sits in the lobby of the corporate giant’s headquarters in New Brunswick, New Jersey.

The corporate credo was written in 1943 by Robert Wood Johnson, the son of the company’s founder. Johnson believed that  businesses had a larger responsibility to society, which included everyone who used their products, their employees and the community.

The credo opens with this: 

“We believe our first responsibility is to the patients, doctors and nurses, to mothers and fathers and all others who use our products and services. In meeting their needs, everything we do must be of high quality. We must constantly strive to provide value, reduce our costs and maintain reasonable prices. Customers’ orders must be serviced promptly and accurately.”

Fast forward to 2022. 

Johnson & Johnson is engaged in a very public attempt to stiff-arm its customers who alleged they were injured by the company’s talc products. 

Johnson & Johnson is using a legal strategy dubbed the Texas Two-Step. 

“For years, Johnson & Johnson denied claims that its products contained asbestos,” said Senator Dick Durbin, who has introduced legislation to outlaw the strategy. “But internal company documents obtained through the discovery process told a different story.  They showed that Johnson & Johnson knew about the asbestos in their products while they were actively advertising the use of this product by adults and to use it on our babies.”

“Johnson & Johnson faces around 38,000 claims from people with ovarian cancer or mesothelioma who allege that the company’s talc products caused their illness,” Durbin said. “But Johnson & Johnson’s use of the ‘Texas Two-Step’ means that those 38,000 cancer victims no longer are able to bring their claim against the company.”

Harvard Business School’s J.S. Nelson is the author, with Lynn Stout, of Business Ethics: What Everyone Needs to Know (Oxford University Press, 2022).

She points to the Johnson & Johnson case as one that sheds light on the hypocrisy of corporate America professing a belief in business ethics while acting unethically.

“Johnson & Johnson has their code of ethics chiseled in stone in their company’s lobby,” Nelson told Corporate Crime Reporter in an interview last month. “But right now they are doing this Texas Two-Step to get rid of the lawsuits on talcum powder. It’s outrageous. And they have the code of ethics in their lobby? It’s not about what you say, it’s about what you do.”

“It doesn’t matter that you have stone tablets in your lobby proclaiming your ethics. It matters that they were not lived inside your organization. That was not part of the identity of the organization.”

Another case in point: Boeing.

“It was the company that everyone pointed to as the ethical company. Arthur Andersen was that company that everyone pointed to. The namesake of that company went out of his way to say – do it right. His company, the one with his name on it, is the one that condones Enron.”

“People understand how fundamental it is to be able to sail the ship. If you have your business ethics in place and you are not just putting stuff up as wallpaper, but you are actually telling people how you want them to behave and behave ethically, setting up examples and celebrating the people who are doing this right, and telling people through your actions as well as your words, then you actually have a competitive advantage. Everybody is at the oars, they are rowing hard, they are excited to come to work.”

“What happens is that people hand wave and then the termites infest the ship. The message becomes – all we care is that you hit your numbers and we don’t care how you hit your numbers.”

“We know since the 1950s that if you give people quotas, you are telling them to cheat. If you just tell people – make this number and you don’t do anything else to make sure that the customer experience around that number is a good customer service experience, you are going to get cheating. You are going to get it.”

“You are putting pressure on people to get the number and they will get the number. That is why you get Volkswagen. The culture inside VW in Germany was known as North Korea without labor camps. Are you going to speak up and say – clean diesel is not a technological possibility? They were not interested.” 

“Boeing was another company that took ethics seriously. Then it merged with McDonnell Douglas and became this other company where the engineers and concerns for safety were so removed from headquarters that you saw the same pressures to drive just for the numbers. All of your ethical people leave the company. And the people who are left are the ones who are going to tell you what you want to hear. And then you have planes falling out of the sky and people lying to the FAA.”

“You see these huge scandals starting to metastasize.” 

“Take Wells Fargo. It’s not just the 3,500 fraudulent accounts. It’s the robo signing for mortgage foreclosures. It’s the predatory behavior toward veterans. It’s the car insurance that was sold to people who didn’t need it. It was this and then that.”

“People who see how rotten the company is and they jump ship. You may think business ethics is hand waving or window dressing. But if you approach it that way, you are going to have your ship fall apart. You didn’t have the fundamentals in place in order to be able to row your boat. So how can you possibly chart a course with your boat coming apart at the seams. Massive companies are being taken down by this.”

“There is plenty of cynicism around business ethics. But you either get it right or you don’t.”

“Linda Trevino talks about ethics as a garden. You have to tend to it. I would say – it’s a garden and something is going to grow there. It’s either to grow what you want to grow, or it will grow something else. Tend it. Get it to grow what you want to grow there so you have a productive garden.”

You say either you do it right or you don’t. Toward the end of your book you ask – what are some of the best ethics and compliance programs in business today? 

And you come up with Costco and Hershey’s and Lockheed Martin.

Costco has four principles, it’s code of ethics – obey the law, take care of our members, take care of our employees and respect our suppliers. 

I get Costco and Hershey’s. But Lockheed Martin?

Can a company that builds weapons of mass destruction be an ethical company? 

Also tobacco. Tobacco barely gets a mention in your book.

Can you have an ethical company that makes products that kill thousands of people?

“Let’s say you see your purpose as trying to help your customers do whatever they are going to do in the best possible way. For example, I talked to some people at Google who talked about the contract that Google had with the military for targeting intelligence. There was a protest at Google. Workers felt that their intellectual contributions to the company were being abused by being turned over to the military.”

“I talked to people inside Google who said – no, we were trying to help the targeting system just target the military targets that they should and spare children and avoid collateral damage. Let’s try and make sure we have as few other casualties as possible.”

“I don’t know where your moral sense will come down on this. I can see people on both sides of that. Certainly with the war in Ukraine, that kind of military technology has targeted applications that will just hit the one warship or tank. Those are now being deployed on the battlefield to stop a major aggressor, Russia.” 

“I don’t want to say all defense contractors are bad. There are good people doing what they believe they should be doing. It’s morally complex. And other companies too. Take Juul, the vaping company. Juul has said its cartridges are not causing lung damage in kids. Juul was saying they were helping to reduce smoking. And smoking was even more damaging in the population.” 

“It was intended to be a transition product to get people off of tobacco. Was it the lesser of two evils? Some people inside the company believe that. Other people have been cynical saying – they are selling an addictive product, there is no reason to take in nicotine other than to be addicted to it. It’s complex.” 

Could your book have been titled – Corporate Crime: What Everyone Needs to Know?

“We often approach ethics as just compliance. We ask – what are the liabilities and penalties? We often think about corporate crime as the ultimate set of liabilities.” 

“But I want to talk about ethics as more aspirational than just about compliance. Compliance is obviously a part of it. There are large chunks of the book that address compliance and what you need to know about compliance. But ideally if you are running a company, if you are just looking down at the floor of compliance, that means you are not looking up at the potential for pro social behavior, the potential for motivating people, the potential for creating an organization that people want to belong to.” 

“You are missing so much. There is so much upside. This is a huge competitive advantage. I’m being interviewed by the Corporate Crime Reporter. But we have talked about fear for so long. You have to pay for law departments to investigate everything because we are afraid, we are afraid, we are afraid. But we can be part of the solution. We can be part of the upside.” 

“I see the message as far more empowering than just don’t touch this third rail.”

If the students at Harvard Business School put away their phones and read your book cover to cover, they might just drop out of Harvard Business School. It reminded me of an interview I did just a few weeks ago with Jeff Grant. And based on that interview, we ran a story titled – Jeff Grant on Religious Ethics versus Business Ethics.

I asked – how are religious ethics different from business ethics?

“Religious ethics is teaching a basic system of right and wrong, about what is healthy, unhealthy,” Grant said. “It’s character building. You build your character and come closer to God.”

“Business ethics is about the health of the corporation and delivering value to shareholders. It’s a twisting of ethics to satisfy the needs of the business in the name of capitalism.”

“I hear what you are saying,” Nelson said. “But having spoken with many students at Harvard Business School, this new generation is really excited about making their mark on the world. This new generation sees their purpose as deeper. They are responding to discussions about what they can do at work. I don’t want them to drop out. I want them to go into business and become the CEO and run their companies this way.” 

“They have enormous managerial discretion to run their companies this way. They will have tremendous influence within organizations. We talk about giving voice to values. It’s about speaking truth to power without getting fired. We need the most ethical people to stay within companies, to be in those meetings, to bring up the question of ethics, to bring humanity back into conversations.”

“When we talk to people about ethics, it comes down to about five or six basic ideas of fairness, equality, integrity. They resonate with us as human beings.” 

“It’s not that we don’t agree on what the right thing to do is and what the fundamental values are at stake. The real puzzle is why we don’t do what we know what we should do? When we know there is a known ethical issue, why are we not doing the ethical thing?” 

“We are good at rationalizing things. We try not to identify ethical issues as ethical issues. If we did identify them as ethical issues, we would have to behave differently.”

“That’s why we must start talking about ethics and start using the language. It changes behavior. If you point out to someone – this is not just moving numbers on a spreadsheet, but you are polluting a lake, or you are harming these people. You get a different response.”

“There are psychopaths who have no conscience. And there are sociopaths who have very little conscience. But the vast majority of people will hear that and respond.” 

Fifteen years ago, University of British Columbia law professor Joel Bakan came out with a book and movie titled – The Corporation: The Pathological Pursuit of Profit and Power.

That book and movie embedded in the American mind the idea of a corporation as a psychopath.  Bakan analyzed the corporation the way a psychiatrist would analyze a patient. 

He found its character to be pathologically self-interested.

It had the characteristics of a psychopath.

Callous unconcern for the feelings of others. 

Reckless disregard for the safety of others.  


Incapacity to admit guilt.

Failure to conform to social norms with respect to lawful behaviors.

What do you make of the corporation as psychopath?

“Institutions are only people. Corporations do not move. They don’t have hands and legs. They don’t do anything without people. At some point, nothing moves unless it’s a person. Institutions are just collections of people.” 

“Research is showing that context and expectations matter. If you describe a corporation as a psychopath, that’s not encouraging the best of them. It may be a true description of how they are working. But a small percentage of the population are actually true psychopaths.”

Do you consult with companies?

“I don’t.” 

People writing and lecturing are also consulting with companies. Is this a problem in the field?

“That’s why I wanted to stay an academic. I wanted the freedom to talk honestly to people. There are a lot of people who care. If they are actively working with organizations to try and turn compliance systems around, that’s important. There is a value to being inside a company and to knowing how hard this is to really be on the ground and be turning companies around. That’s good work. That is important. It’s also important that you keep your own integrity, that you say what needs to be said and you really are helping. We need good people doing this work. We need companies to turn things around.”

“I don’t want to see it as window dressing. I don’t want to see it as a cover. I don’t want to see people compromised in their integrity. It’s important that if somebody gets in a situation like that and they can’t make a difference, that they can walk away.”

[For the complete q/a format Interview with J.S. Nelson, 36 Corporate Crime Reporter 21(12), May 23, 2022 print edition only.]

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