What the Love Bug Can Teach Us about Business Ethics: An Asian Perspective

For most computer users, any reference to the recent “I Love You” virus conjures up only bad memories. But for many residents of the Philippines, where the virus reportedly originated, the publicity generated by the incident also served as a reminder of the thriving computer industry that exists in this Southeast Asian country of approximately 68 million people.

At Wharton’s seventh Asian Regional Alumni Meeting, held in Manila on June 10, Wharton alumnus and guest speaker Manuel V. Pangilinan opened his remarks with a reference to the “I Love You” virus. In line with the meeting’s theme, “The Asian Century Begins,” Pangilinan — who is president and CEO of the Philippine Long Distance Telephone Co. and also executive chairman of Hong Kong-based First Pacific Co, a conglomerate involved in the telecommunications, banking, consumer and real estate industries – pointed out that news coverage of the virus drew international attention to the fact that the Philippines produces 150,000 computer engineers each year and is the world’s second-largest exporter of engineers to the U.S. He also shared an intriguing quote from Philippines trade secretary Manuel Roxas: “We’re not proud of what the virus authors did, but we must harness their creativity.”

After all, it has been reported that the intent of the virus’ authors was to capture user passwords for accounts with Internet Service Providers. These passwords would be redistributed, granting some people Internet access for free. The authors “felt they were doing the right thing,” said Pangilinan, referring to them as “techno-Robin Hoods.” But what kind of “right” is this? Shouldn’t there be some way for the authors to achieve their noble ends without resorting to such disruptive means?

According to some observers, said Pangilinan, the predicted “Asian Century” is already over, having ended almost before it began, with the Asian economic crisis of the late 1990s. However, the recent growth rates in some Asian countries suggest otherwise. “This could still be Asia’s century,” he said. How can the region recover? According to Pangilinan, one important measure is to pay careful attention to the often uncertain territory of business ethics.

Pangilinan acknowledged that the very term “business ethics” is often considered an oxymoron. What’s just and what’s good for business can have an unfortunate habit of diverging: In his words, “ethical behavior is not always rewarded, and unethical behavior is not always punished.” But, he argued, an important lesson from the Asian crisis is that ethics is, indeed, strongly linked to business performance – if one takes a long-term perspective. Further, he placed some of the blame for the crisis on a lack of ethics among the businesses concerned.

Pangilinan explained that First Pacific believes very seriously in “old-fashioned core values” such as honesty, diligence, commitment and hard work. He discussed the company’s policy of seeking out quality managers and making them owners of their businesses, which increases their desire to commit themselves to the company’s success. In addition, he said, First Pacific has adopted a “collegial” attitude which promotes openness and honesty. This openness allows for the exchange of fresh ideas and improves communication, both within the organization and with its partners and customers.

While affirming that these values have served First Pacific well, Pangilinan went on to say that following them has not always been easy, as ethics is rarely a “black and white” matter. It’s fine to declare that businesses should assume their ethical responsibilities, but which of those responsibilities are most important? “Where,” asked Pangilinan, “does your principal duty lie – to your staff, your customers, your shareholders, your creditors, your community, your nation?”

He used the example of Merck & Co., which in 1979 made the difficult decision to manufacture a cure for “river blindness” and distribute it to millions in Africa and Latin America. Why was this decision difficult? Because the cost to Merck was $100 million, and those who needed the drug were unable to afford it. Despite the absence of any tangible economic return, Merck went ahead and provided the cure to those in need.

However, according to Merck’s chairman, the decision was not based solely on emotion. The company had made a similar choice when it brought streptomycin to Japan to combat that country’s tuberculosis outbreak after World War II. And although Merck made no profit on that deal, “it’s no accident that Merck is the largest American pharmaceutical company in Japan today.”

Pangilinan shared another story, this one about Nike’s response to the recent public outcry against the company in the U.S. Many people boycotted the shoe and clothing manufacturer when it was discovered that it paid comparatively low wages to employees in their factories in Asia. However, in taking steps to rectify this, Nike created an interesting situation in Vietnam: Its employees in that country are now paid more than its doctors. “What’s the social cost,” wonders one Nike executive, “if a doctor leaves his practice and goes to work for us?”

Pangilinan referred to a paper written in 1996 by Wharton ethics professor

Thomas Donaldson called “Ethical Wealth of Nations”. The paper, whose title echoes 18th century political philosopher Adam Smith’s Wealth of Nations, examined the structure and implications of what Donaldson calls “an ethical advantage of nations” – a sort of ethical “character” that exists alongside a nation’s economic features. Pangilinan discussed what he felt were the two most important of Donaldson’s four ethical propositions.

According to the first, “fairer distribution of income,” an inequality in income distribution will reduce the morale of workers and permit the misallocation of resources as well. By the same token, distributional fairness will enhance both efficiency and productivity. The second category, “better government,” asserts the value of an accountable and open government to a prosperous economy. Pangilinan mentioned Hong Kong as an example of a market which has benefited from its freedom and quality of government. When economies are allowed to order themselves spontaneously, he said, is when we will see them perform the best.

Pangilinan concluded his speech by observing that Smith, who “keenly regretted society’s disposition to admire ‘wealth and power’ at the expense of ‘wisdom and virtue,'” would be distressed to learn how little we’ve progressed since his time. To those of us standing at the edge of the new millennium, at the beginning of the “Asian century,” Pangilinan asked this question: “How would we like to be remembered in centuries to come?”

Hopefully, he says, history will recall that we took this opportunity to learn “to do the right thing.” If we are fortunate, this will be remembered as a time when people such as the “I Love You” virus authors stopped writing viruses, and instead began to lend their creativity, their skill and their vision to organizations dedicated to realizing ethical goals.

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