IBM – An ethical company?

By: Stefan Pertz

3rd Year

Award: N249, BA (hons) International Management Studies
Subject: Ethics: Corporate Social Responsibility (MGM 573)

Date: 17 January 2005

Task:
Evaluate the ethical and CSR implications of the role of IBM during World War II.

Introduction

Edwin Black presents a book accusing IBM of having knowingly involved in business with the Third Reich. As a result of this co-operation the Nazis were able to identify Jews across Europe and speed up their extermination. IBM’s Hollerith technology was used to register and sort people.

After a description of their history, Black shows in detail how IBM was able to accumulate millions of dollars in profit even though the two countries were at war with each other.

The aim herein is to discuss IBM’s business ethics and CSR approach during the beginning of the century as well as their role in the community today. Different models and theories will be used in order to explore IBM’s reasoning for the continued business with the enemy and their new role in our time. Illustration 1 shows the different influences any company is exposed to, placing IBM in a broader context.

Part I – IBM during the time of the Third Reich

IBM – Who is it?

Companies are communities of different people, separated into staff and management. It is the responsibility of management to lead the company and to ensure the wellbeing of the employees¹. Another responsibility is to generate profitable Return on Investments. Without such profits the company would not be able to exist for a longer period of time².

To be profitable common goals need to be set out. Management will provide the structure enabling the company to reach them. It is necessary that both, ends and means, are provided to the members of the organisation. The structure of the organisation will determine the degree of ethical behaviour. Systems to reward ethical behaviour, regular training sessions and the language of the organisation have an impact on the attitude of staff ³ Apart from the structure of the company management will also set out the boundaries of what is acceptable behaviour and which practices are to be punished as being non-conforming with corporate culture. Misbehaviour is produced within an organisation by allowing practices that conflict with the codes of conduct .⁴

IBM – The Leader Thomas J. Watson

As stated above, the management has a huge impact on the behaviour of staff. Today there has been a separation between ownership and management of a company and managers are being controlled by e.g. supervisory boards. In former times managers were also the owners of the company and did not report to any outsider about their decisions⁵. The main features of capitalism, opposed to public ownership, are private ownership, competition and profit.⁶

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1 Gómez-Mejia et al. (2004), page 536 ff

2 See Ackroyd et al. (1999), page 86

3 See Harvey (2000), page 44, 45 and 49

4 See Ackroyd (1999), page 75

5 See Arnold (2004), page 479

6 Bradburn (2001), page 32