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A Yardstick For Business Ethics

CEO James K. Baker sets a business standard by setting a good example. INTERVIEW

WHEN James K. Baker steps up as chairman of the U. S. Chamber of Commerce April 30, his public theme will probably center on business opportunities in Eastern Europe. But privately, when he can choose his audiences, he'll pursue an issue that has interested him all his working life: ethics.

As chairman and CEO of Arvin Industries, Inc. - a Fortune 500 manufacturer headquartered in Columbus, Indiana that produces auto parts for global markets - most of his thinking on the subject has been done in the context of corporate America. So will he focus on business ethics?

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``There is no such thing as `business ethics,''' Mr. Baker insists during an extended interview in Indianapolis snatched from his busy schedule. ``There's only ethics. What you do over here is no different from what you do over there.''

The lean, quiet-spoken Baker traces his interest in ethics to ``a piece of fourth-class mail'' that arrived in 1978, inviting him to an ethics conference at Bentley College in Boston. There, sitting on a panel with a CEO whose corporation had one of the nation's oldest codes of ethics, he was impressed by the man's eloquence. Two week's later, he learned that half a dozen of its officials had been indicted for a 7-million-dollar problem in Europe.

``Here was a guy whose whole intent was in being ethical,'' says Baker. ``And I thought, `There's something missing - what is it?'''

That missing ingredient, he concluded, was ``the personal trust and personal relationship between two people. Big companies don't think about that very much. But a big company is simply a combination of lots of two-people relationships.''

A graduate of DePauw University in nearby Greencastle, Baker admits that he looks for ``midwestern'' values when he recruits for Arvin. Yet his activities carry him far beyond his midwestern roots.

``He's a consummate professional,'' says Alfred H. Taylor, Chairman of the Kresge Foundation in Troy, Michigan. ``There is a quiet confidence that surrounds him. You have a feeling that he has a very complete grasp of a situation.''

Peter Likins, President of Lehigh University, also gives him high marks. Both men are members of the Business-Higher Education Forum, an organization of corporate leaders and university presidents. Dr. Likins notes that Baker has been ``especially effective from the perspective of the academics in demonstrating real compassion, and integrity, and concern, and sensitivity - while at the same time bringing the businessman's point of view to the dialogue.''

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For Baker, that point of view is necessarily centered in ethics. He recalls an early encounter with ethical issues when, at age 37, he had just been made executive vice president of Arvin. Reporting to him was a man 20 years his senior, for whom Baker had once worked. ``He came to me and said, `Would it be alright if we sent airline tickets to this purchasing agent in Philadelphia who works for the government? He and his wife want to go to his daughter's college graduation in California.'''

Though the law made it illegal for the purchasing agent to accept such a gift, it was not yet illegal (as it would become in 1977 under the Foreign Corrupt Practices Act) for Arvin to offer it. Furthermore, the Arvin executive felt that future government orders of Arvin products would be dependent upon his answer.

``My response was one of great impatience,'' says Baker. ``I went to my boss within one or two hours and said that I felt that this was cause for dismissal: If he even considered that there was a likelihood for approval, there was something wrong, and his standards were not like the rest of ours. He was fired the next day.''

Today, he notes, ``we have built into our system a little more leniency, in that if you've got an ethical dilemma you don't get hit over the head quite as hard as I hit him.

The point, says Baker, is that ethical behavior in business includes ``everything you do. ... The guy who goes for that extra hundred miles on the expense report - 20 years later he may go for something that's really bad,'' he says.

How does a company promote a high standard of ethics? The answer, for Baker, does not lie in making lots of rules. Neither a company nor a nation can ``design enough regulations to catch all of the unethical behavior. So you're just going to have to create an environment that promotes good, sound, ethical behavior.''

That environment is partly reflected, Baker feels, in a commitment to community service. ``Among all the business leaders I know,'' says Edward Donley, chairman of the Executive Committee of Air Products and Chemicals, Inc., in Allentown, Penn., ``he's one of the most committed to public service and doing things for the community.''

``He's a model of what a citizen ought to be,'' adds J. Irwin Miller, former chairman of Cummins Engine Company, also located in Columbus.

That ``model citizen'' role, for Baker, is one of the crucial ways in which senior officers set the ethical environment of a corporation. ``Young people really do sense the tone in a company. They really do know if there are some corners being cut,'' he says.

``If I drive in in the morning - our working hours are 8 to 5 - having had a second or a third cup of coffee, and I arrive at 10 minutes after 8, and park in the very front of the parking lot, with a sign that says, `Mr. Baker' - they don't like that. We like to send the signal that everybody's even, everybody's alike, everybody has the same rights - no names in the parking lot.''

Baker distinguishes between rights, which everyone shares, and responsibilities, which fall more on some than others. If the two are confused, he says, you send the wrong signal by ``treating yourself special - with big black limousines and parking places and executive washrooms and special stationary and so on.''

Baker is concerned, however, that many corporate CEO's don't see it that way. Just as society's ethical standards have lowered, he says, so standards in the executive suite have also lowered. He traces the problem to increased pressure and to the belief that ``making big bucks'' is always best for the shareholders.

``I think that's very different from saying, `What's right for the shareholders? What's right for this company? What's right for employees?' That's not the yardstick, unfortunately.''

If he could do one thing for the nation, he says, he would try to ``convince every CEO in this country that it is strictly up to them to set the tone of ethics in their company. I think they're listening to their lawyers. And I don't want to blame their lawyers. But the lawyers are saying, `Hey, we didn't violate any laws: We're ethical.''

Recently, discussing a possible deal with a Japanese businessman, Baker recalls that he was ``really set back on my heels'' when the man said, in essence, `We put personal relations first, financial issues second, and legal issues last. You Americans have it in just the opposite order.'''

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