Social Economics: Premises, Findings and Policies

By Edward J. O'Boyle | Go to book overview

9

ETHICAL CONFLICTS IN MANAGING THE S&L INSURANCE MESS

Edward J. Kane

With the benefit of hindsight, most observers agree that taxpayer losses in the S&L (savings and loan association) insurance mess exceed 150 billion dollars and resulted from a pattern of industry losses, expedient policy mistakes, and taxpayer ignorance and unconcern about the size and significance of losses and mistakes alike. Assessing blame for this mess reduces to a pair of tasks: to identify damaging mistakes and to assign responsibility for them.

The first task is a straightforward investigative chore: finding out what actually happened and determining the extent of the damages. Assigning blame is more complex. It entails analysis that turns on whether to benchmark right conduct by means of a relative or an absolute ethical standard.

Even though it accords situational managerial ethics informal standing, common law employs an absolute standard for assigning responsibility for the S&L insurance mess. This massive body of centuries-old case law presumes accountability for actions that harm others and treats conduct as morally wrong whenever it is violative of duties of loyalty and care legitimately owed to others. Because the duties a manager owes to different parties must regularly be traded off against each other, this standard is difficult to apply in practice. Thus, accountability for damages done to various stakeholders must be thrashed out case by case in the courts.

A relative standard is endorsed by Jackall, who documents that operative principles of managerial and professional ethics often conflict with the ideals of academic and churchly moral codes. He defines managerial ethics disarmingly as rules that "managers construct to guide their behavior at work" (Jackall 1988:4). The morality of these rules, he says, "does not emerge from some set of internally held convictions or principles, but rather from ongoing albeit changing relationships with some person, some coterie, some social network, some clique that matters to a person" (Jackall 1988:101). In large organizations, "independent morally evaluative judgments get subordinated to the social intricacies of the bureaucratic workplace" (Jackall 1988:105). An avowed goal of these intricacies is to "nurture

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