IBM - An ethical company?

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.

Illustration 1: Stakeholder influences on the quality of management

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Source: Own illustration in accordance with Baker (2004)

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 employees^[1]. 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 time^[2].

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 decisions^[5]. The main features of capitalism, opposed to public ownership, are private ownership, competition and profit^[6].

Watson was a natural born sales person, selling was his calling. Truly addicted to the thrill of selling, IBM was his vehicle to gain satisfaction^[7]. He shaped IBM in a way that would support his goals. Even if rules needed to be bend or broken, Watson would do it in order to increase profits. Wars between nations were seen as business opportunities by him^[8]. Watson’s actions and attitudes can be classified as ethical egoism. Following his calling he acted in a way that maximised his own long term interests. His interest in others was surely just to pursue his own interests^[9]. In the midst of the war he made sure that his staff was receiving their salary, even if that meant that he had to break laws^[10]. Watson’s organisation can be understood as a regime where he ruled, however it would be based on mutually understood rules, both formal and informal^[11]. This mutual agreement made Watson one of the most respected managers of his time^[12].

IBM’s business practice can be described as a pure marketing concept as opposed to the societal marketing concept. Watson was serving consumer needs without taking the damage into account that he could do to humans or the environment. Watson refused to take responsibility for any consequences. Nowadays companies should identify themselves with the concept of the societal marketing concept, which takes society (human welfare), consumers (seeking satisfaction) and companies (seeking profit) into account^[13].

IBM – The Staff

IBM employed staff in more than 70 countries. Watson characterised them as World Citizens, which were said to be highly loyal to Watson and IBM with no boundaries for them^[14]. With soaring growth IBM was also a company that provided work and salary for the staff. IBM was successful when it was most needed. In the late 1920’s and early 1930’s the world was hit by the great depression. The human misery started when people had used up all their resources, international trade was in fast decline and millions of companies disappeared. Lacking social programs such a situation forced people to rely on relatives, friends and donations. Everyone who could find work was indeed lucky^[15]. IBM provided work both at home and abroad.

Scientific management is said to work better in bad economic situations such as the great depression. Typical for scientific management is that workers perform a small task only, education plays a minor role and they are not expected to think beyond their given task^[16].

Management needs to make sure that the code of conduct is followed throughout the organisation. People acting accordingly need to be rewarded while failing to comply with the corporate culture should be punished^[17]. IBM staff received sales training in their own school. Selling became their credo^[18].

People appreciate direction and support and want to do what is right. The role of the leader is extremely important in establishing ethics and setting examples. Taking into account the economic situation it is not surprising that people were willing to work under the regime of Watson, a leading example of a successful sales person^[19].

From our today’s point of view we might even stamp IBM workers as egoists, who would only pursue their own interests even at the expense of others^[20]. In view of the great depression this egoism might be classified as healthy and normal in the sense that it is rooted in the survival instinct^[21]. In terms of moral reasoning staff might be classified on either the lowest level where people are driven by reward or punishment for an action, or at the conformity level. At the latter staff would do their duty rather than what would be right^[22].

IBM and other companies

This section focuses on the relationship between IBM and its business partners. In addition, a non-related comparison company will be presented . Illustration number 2 depicts a simplified inter-relationship between IBM and its partners.

Illustration 2: IBM customers in Europe

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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

^[7] See Black (2001), page 41-42

^[8] See Black (2001), page 89

^[9] See Bradburn (2001), page 4

^[10] See Black (2001), page 247

^[11] see Bradburn (2001), page 87

^[12] See Black (2001), page 303

^[13] See Bradburn (2001), page 18 and see Kotler et al. (2004), page 14-15

^[14] See Black (2001), page 186 and 428

^[15] See shambhala.org (2004)

^[16] See Ackroyd (1999), page 91-92 and see Staehle (1999), page 23ff

^[17] Harvey (2000), page 43 and 47

^[18] See Black (2001), Page 66 and 149

^[19] See Vinten (1994), page 54

^[20] See utilitarianism.com (2004)

^[21] See sign-lang.uni-hamburg.de (2005)

^[22] See Bradburn (2001), page 13