By George J. Papaioannou, Ph.D.*
The recent article, “Plato’s Descendants Consider Ethics in the 21st Century,” (Greek News, May 25) calls for a look to the wisdom of the ancients that can be applied to modern-day affairs. Despite the severe penalties contemplated in the Sarbanes-Oxley Act and reflected in other regulatory and judicial actions in response to the Enron, WorldCom, Adelphia and Tyco scandals, many commentators are wondering whether such “law and order” measures are enough or we need to re-examine fundamental premises of the ethics and goals that permeate the organization of the modern corporation and the working of the financial markets. It is at the juncture of such developments that we need to go back to the roots of ethical philosophy and ask “What can ancient Greek ethical philosophy and attitudes can teach us about today’s corporate lapses? What can we learn from the ancient classical wisdom?”
The need to serve the common good: From the polis to the market.
Loyalty to the polis (city-state) was the central principle of the social and political conscience of ancient Greeks. In his funeral oration, Pericles spoke of the good things that the polis bestowed on its citizens and how both the citizens and the polis must look after each other’s interests. Socrates chose to stay and die rather than betray the laws of his polis and flee away. Given the importance Western liberal societies ascribe to the market system, the Greeks would have advised us to think of it as important a common good as the polis was to them. This would dictate that we safeguard the market’s integrity and do not undermine the public’s confidence in it. The corporate scandals of recent years demonstrate how personal gratification can come ahead of the interests of the many served only by fair markets. An ethos of ethical egotism that favors individual utility and displaces the ethos for the common good, i.e., the market, is not a viable prescription for economic behavior.
The need for moderation: From value maximization to greed.
What is the ethical base of economic value maximization? Is it synonymous to greed? Value which is not associated with efficient utilization of economic resources can not claim ethical justification. Corporations exist to satisfy human needs by utilizing scarce resources economically and efficiently. A good market assigns more value to firms that are more successful in producing the best output with the least amount of resources. This value is none other than what investors are willing to pay to buy and hold the firm’s capital stock. Unless, however, investors have fair and full information, they may divert their capital to failing firms (e.g., Enron) and, thus, destroy capital and diminish the society’s capacity to meet its needs. Therefore, value maximization is not an option but rather a moral imperative for those who run enterprises, whether of the private or public sector. Value maximization, although not synonymous with greed, it depends on it. Greed in the service of value maximization works as an incentive for individuals to run successful enterprises that maximize economic surplus. Greed works against value maximization and economic efficiency when it serves only the interests of the few. This happens, for example, when company managers and/or owners try to distort information so they can trade their stock holdings and reap profits from unsuspected investors. Balance and moderation was the hallmark of ancient Greek wisdom. The words from the oracle of Delphi were: “Everything in moderation.” Aristotle advocated that lack of balance can turn anything from good to bad. Therefore, to keep greed on the right balance, we should be concerned with society’s attitudes regarding the growth of needs among its members. The following is an exchange between Socrates and Kalikles in Plato’s dialogue Gorgias.
“Kalikles: The best life is enjoyed by the man who lets his desires and passions grow as ravening and insatiable as they can, and takes care that he has always present the means of gratifying them.
Socrates: Compare the soul of such a person to a sieve, because this kind of soul cannot hold anything and thus can never be full with a finite amount of things.”
About nine centuries later, the student of classical philosophy, St. Augustine, said the same this way: “Rich is not one with great wealth but one with few needs; and poor is not one with little wealth but one with many needs.”
The need for ethical education: From preparing for good lives to preparing for careers.
We hear a lot these days about the commitment of business and other professional schools to the teaching of ethics. Nonetheless, as the French philosopher Pierre Hadot has pointed out very succinctly that, unlike education in antiquity, modern education is about training people for careers as specialists and professionals and not, primarily, as human beings (What Is Ancient Philosophy?). The emphasis of ancient Greek education on ethics is exemplified in what Alexander the Great said of his education: “My father gave me life, but my teacher (Aristotle) gave me the good life.” And by “good life,” he did not mean “dolce vita.”
The need for knowledge: From ignorance to virtue.
Mainstream ancient Greek ethical teaching was hostile to ethical relativism as practiced by the Sophists. To Protagoras’s “man is the measure of everything,” Plato’s Socratic voice retorted, “virtue is knowledge.” Through teaching and training, people could understand to distinguish good from evil and pursue the former. Or could they? Plato recognized the difficulty of ethical teaching when he cautioned that a person should not approach professors of virtue (arete) unless one already knows whether what they offer will help or harm the soul. If one needs to know about arete, however, one must know very little of it. How is then one able to recognize it in what is taught? And if one can pick the right teacher of ethics (arete), then one needs no such teacher! This is a humbling note and reminder to our modern efforts to teach ethics to students.
Because ancient Greeks were great thinkers of the human condition it did not imply their contemporaries lived by the philosophers’ instructions. The “guards” Plato had placed at the top of his Republic were not necessarily above self-interest. When the Delian Fund, established under the aegis of Athens with contributions of the members of the Athenian Commonwealth, came to be a very sizable amount of money, Pericles did not hesitate to transfer it to Athens and use it to build the Parthenon. The expropriation of the wealth of the allies (i.e., the shareholders) by the Athenian republic (i.e., the manager) was an egregious case of the moral hazard problem that still afflicts organizations. (Plato would have plausibly quipped that Pericles had paid the wrong teacher to learn [the wrong] ethics.) Thus, the lesson is that for every disinterested and selfless individual (like Socrates), there is more than one self-dealing person. At the end of every lofty and inspiring school of social ethics, there lurks the reality of human fallibility. Aristotle would admonish us to heed the ethical teachings of his times but would also instruct us to take the “law and order” measures that compel the citizenry to steer away from actions that harm the common good.
*George Papaioannou, Ph.D., is professor of finance at Hofstra University’s Frank G. Zarb School of Business.