Richard Sackler and the threat of moral collapse in family business

And the theory of morals that surrounds family businesses

Let’s be clear about this: in business, as in life, there isn’t always one correct answer. So the teaching of a decision-making philosophy that is deliberate and systematic, but still open-minded, is hardly controversial on its face. But to help students overcome the fear of sounding stupid and being remorselessly critiqued, they are reminded, in case after case—and with emphasis—that there are no right answers.

The emerging story surrounding the role that the Sacklers, and in particular Richard Sackler, played in contributing to the current opioid crisis in the United States is the latest in a growing genre of business ethics cases where business leaders find themselves succumbing to what we might call moral collapse.

Moral collapse is not characterized by a leader engaging in morally complicated behavior, behavior involving difficult trade-offs where reasonable people who hold different values can disagree about what the right course of action should be. Moral collapse, on the contrary, is characterized by a leader engaging in behavior that just about all of us see as deeply problematic and egregious, from a wide range of moral standpoints.

Sackler peddling OxyContin over the years, despite the preponderance of evidence pointing to its ill effects on individuals and society as a whole, is an example of succumbing to moral collapse. How do people like Sackler end up in this place? The temptation is to turn these executives into cartoon villains, Lex Luthors who just needed the right circumstances to reveal their villainy to the rest of us. Alluring as this interpretation might be, it’s likely far off from reality. That’s because it’s premised on the Sacklers of the world being bad apples out of the gate, people of malignant character embedded within families filled with greedy capitalists. Certainly some leaders and families share these characteristics, but there are far fewer of them than we tend to think, and in these specific cases, the evidence doesn’t seem to ring true.

This shouldn’t be surprising. It would be easy if the ethical woes that plague the business community could all be solved just by spotting and getting rid of the supposed bad apples. But there are far too many ethical woes, and far too few genuine bad apples, for this to be a promising avenue to pursue. So the more interesting question is: how might decent families—not saints, to be sure, but not villains either—nevertheless end up succumbing to moral collapse?

A lot of thought is currently invested in answering this question. Harvard Business School professor Eugene Soltes has written an important book on white collar criminality, Why They Do It: Inside the Mind of the White Collar Criminal, that argues that the chief culprit is to be found in the ordinary way that executives make their decisions—the same way we often do, from the gut. His rich analysis warrants its own discussion, so for the moment we will have to put it aside. I want instead to look at a different—and not necessarily incompatible—explanation of what’s going on, one that places at least part of the blame—a significant part—squarely on the shoulders of business schools and executive education programs.

In his latest book, The Golden Passport: Harvard Business School, The Limits of Capitalism, and the Moral Failure of the MBA Elite, Duff McDonald has targeted what he takes to be the morally bankrupt educational practices that are found at places like HBS. His thinking is on full display in a recent piece he wrote on Sheryl Sandberg at Facebook, “When You Get That Wealthy You Start to Buy Your Own Bullshit: On the Miseducation of Sheryl Sandberg.”[1]

Given the title, it should be unsurprising that McDonald’s piece pulls no punches. It also, regrettably, indulges in considerable hyperbole, suggesting, for instance, that all of leadership studies is worthless (he characterizes the leadership industry as an “annual multi-billion-dollar exercise in nonsense”).  He also believes that the case-based teaching method plants the seeds for high-powered executives to embrace an “anything goes” mentality that eventually leads them, as McDonald sees it, to no longer aiming at doing the right thing. As he puts it in the article:

Let’s be clear about this: in business, as in life, there isn’t always one correct answer. So the teaching of a decision-making philosophy that is deliberate and systematic, but still open-minded, is hardly controversial on its face. But to help students overcome the fear of sounding stupid and being remorselessly critiqued, they are reminded, in case after case—and with emphasis—that there are no right answers. And that has had the unfortunate effect of opening up a chasm of moral equivalence in too many of their graduates. And yet, there are obviously many situations where some answers are more right than others. Especially when it comes to moral issues like privacy, around which both Sandberg and Facebook have a history of demonstrating poor judgment. While H.B.S. is correct in its assertion that it produces people who can make decisions, the fact of the matter is that they have never emphasized how to make the right ones.

Leadership studies are not one and all worthless, though, and the case-based method does not, as far as my experience goes, teach that there are no right answers. But despite these hyperbolic indulgences, McDonald is certainly onto something. There are a lot of worrisome and overly simplistic ideas that emerge from leadership studies. For example, authentic leadership, which is what appears to be the real target of McDonald’s concerns, does indeed open itself up to criticism for its apparent fetishization of authenticity and its rather embarrassing confidence in individuals being able to calibrate their moral compasses on their own, time and again. The mistake is not in emphasizing character and conscience. The mistake is that this literature has not bothered to engage the past three decades of virtue ethics scholarship or moral psychology.

The resurgence of virtue ethics as a promising “third way” of doing moral theory, one that is neither utilitarian nor deontological, is one of the most exciting things to happen in ethics in a generation. But with renewed interest comes new criticism, and virtue ethicists have found themselves having to defend their views against a host of empirically-informed studies that seem to reveal that we don’t have anything like stable character traits across situations—the ingredients to anything resembling a moral compass or conscience. These situationalists have pressed their case formidably, but just as formidable has been the response by virtue ethicists. Without delving into this literature, what has resulted is a much more nuanced, and more plausible, view of the relationship between character and environment, one emphasizing that cultivating virtues has as much to do with setting people up for success with the kind of incentive structures one places them into as it does with relying on them to hold steady to their moral compass when confronting challenging situations.

The point is that some leadership frameworks—many, let’s face it—put too a high a premium on individuals “knowing themselves”—knowing their vision, knowing their values, knowing their true self—in the hope that this sort of self-knowledge is the secret ingredient to good leadership, moral or otherwise.  Well, it’s not, as we have seen with the Sacklers and time and again throughout human history. But throwing out leadership studies as a whole in light of this is a classic example of throwing out the baby with the bathwater. The demand should be to bring leadership training into profitable conversation with other disciplines, like ethics, and to perhaps also explore alternative leadership frameworks—like adaptive leadership—that emphasize different aspects of good leadership.

McDonald is also onto something in worrying about what is being taught using the case-based method, but his diagnosis is off the mark. The problem is much deeper than I believe he appreciates, since he seems to think that the moral equivalence he’s worried about emerges from a desire make students “overcome the fear of sounding stupid and being remorselessly critiqued,” as he puts it in the quoted passage above.

As I see it, the issue is more complicated. Exercising moral leadership requires proficiency with a battery of skills that together ground virtuous action. These skills include accurately perceiving the various ethical features of situations, adequately weighing moral tradeoffs, and effectively putting into reflective equilibrium judgements of the heart and judgements of the head. In the particular case of enterprising families, it also involves a dynamic calibration of individual morality and familial norms – with family members holding each other to account in moments of ethical ambiguity as well as observing and nurturing the evolution of the group’s collective morality over time.

Developing the capacity to entertain different moral perspectives is an essential part of honing these skills, for without the ability to live in another person’s moral universe—to see the moral world, as it were, through their eyes—one will fail at perceiving all the relevant ethical features of situations, fail at calibrating moral tradeoffs, and fail at engaging in reasonable reflective equilibrium. Here again, leaders of family companies should be at an advantage because maintaining a systems perspective is often built into their social contract with their family partners. Unfortunately, these skills are rarely taught at business schools or within family owner development programs – so educators and advisors must share at least some part of the blame.

Seeing the other side comes with risks, however. It can upend the confidence a person has in their own moral standpoint, leading to a kind of moral anxiety that a person then might be tempted to assuage either by reinforcing their own moral convictions with renewed fervor—at the cost of dulling the skills needed for genuine virtuous action—or by succumbing to a kind of ethical relativism. In other words, doing the important work of building the capacity to entertain different moral perspectives threatens to lead to a kind of moral radicalism, on the one hand, or a kind of moral indifference, on the other.

Consequently, some effort needs to be made to learn how to cultivate the ability to see the world through different moral lenses that sharpen the skills needed for virtuous action while avoiding various pitfalls. The effort requires, among other things, learning to appreciate the difference between seeing the other side, and embracing it, as well as the difference between understanding a moral perspective, and endorsing it. Once again, the collaborative structure of family business provides an ideal setting for this appreciation of multiple perspectives and healthy setting of moral norms. However, it also makes the Sackler case even more disappointing, since it suggests a moral and structural failure of the entire family rather than the ethical lapse of a single individual.

I firmly believe that the case-based method and the strategic use of simulations can provide this sort of morality training – both for individual leaders and even more powerfully for enterprising families collectively. But exactly how to do it in a way that avoids the two pitfalls discussed is an active research program among those of us, like myself, dedicated to getting this right. McDonald, to bring it back to his worry, is not wrong in being concerned that miseducation could lead to a kind of moral relativism that would appear to warrant all sorts of bad behavior. But the problem stems from something far more complicated than helping students avoid relentless criticism in the classroom.

And so, unsurprisingly, the efforts to train business leaders in a way that renders them much less likely to succumb to moral collapse is very much a work in progress. I think McDonald is correct in focusing our attention on the education many of these leaders get in professional settings, though he is off the mark in some of his conclusions. I hope here to have taken some first steps in getting us a little more clear in our thinking about where at least some leadership training may go wrong, and where the threat of moral relativism comes from in the context of professional ethics education.



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