ETHICS IN THE STUDY OF BUSINESS

PAUL V. GRAMBSCH*

It is with mixed emotions that I open this symposium on ethics in the securities markets. It is a most pleasant responsibility to welcome all of you-students, faculty, and members of the business community-to this program which we anticipate is only the first in a series dealing with ethics. On the other hand, it is regrettable that the man whose name we honor today, Mr. Merrill Cohen, cannot be with us. His contributions to ethics in business are many, and we could profit today by his wisdom and counsel as we discuss the topics set forth for the symposium.

It is entirely fitting that the School of Business Administration at the University of Minnesota provide the forum and the necessary leadership to bring to focus important issues of our day. The School of Business Administration exists both to furnish educational opportunities to young men and women who have aspirations in the business world and to search for new truths. The School has an obligation to disseminate these truths and to lead in developing practical applications of the principles and generalizations derived from them. The subject of ethics is a most appropriate one for the School to explore and teach, for the ethical standards which form the basis of our society are important to the continued health of our business institutions.

The Merrill Cohen Fund was established to foster three types of activities. The first is research. Research is needed on an entire spectrum of ethical problems-those problems which arise out of conflicts in a rapidly changing society-involving the "whys" of business behavior. We at the University would be remiss in our duty if we did not stress research as the foundation for the study of ethics.

The second concerns what I call "the awareness function." We

Dean, School of Business Administration, University of Minnesota.

need to develop programs to make students more aware of ethical problems and to encourage student participation in advancing ideas for solving those problems. The exact format of these programs will be worked out over the next year.

The third is to conduct symposia such as this one. Discussion of subjects such as we are going to consider today gives all of us a chance to understand the viewpoints of others and, at the same time, strengthens our own inner convictions.

The subject for today, ethics in the securities markets, is most appropriate for the inaugural symposium. Mr. Cohen's professional interests lay in the securities business; he was active in the setting of standards and the administering of programs designed to promote higher ethical behavior by people in the securities business. He would certainly believe that we need to strengthen ourselves by strengthening each other in the consideration of this topic.

At a time when our concepts and values seem to be sorely tried in every part of life, we can be thankful for opportunities such as this to examine the issues and to assess business behavior as we see it. It is easy to fall into the trap of starting with the assumption that ethics in the securities markets are bad and, therefore, a symposium like this might help us to start in the right direction. Such an assumption is entirely unwarranted. On the other hand, it would be equally unwarranted to assume that ethics in the securities markets are above reproach and, therefore, every action must be defended to the very end. The purpose of the symposium today is to search for truth, and not to prove a case. It is in this manner that the Merrill Cohen Fund can make its greatest contribution.

At this time I would like to acknowledge publicly the many contributions to the Merrill Cohen Fund from people across the country and to pay tribute to a few of Merrill Cohen's closest associates, friends, and relatives who have played major roles in making this fund possible. I must single out Mr. Wheelock Whitney, Jr., Mr. Julius Davis, and Mr. Kenneth Owen. To Mr. Dan Cohen and Mrs. Merrill Cohen we express our special appreciation and fond regards. We are pleased that we can use this method to honor Merrill Cohen who made such great and lasting contributions during his lifetime.

ANALOGIES FROM THE PROFESSIONS

MAYNARD E. PIRSIG

I have only a limited knowledge of the activities of securities dealers. Hence, my objective is not to discuss the problems of that business but, rather, to indicate what some of the professions have done about professional ethics in the hope that out of that may come some suggestions of assistance to security dealers.

THE CONCEPT OF PROFESSION

I think we should begin with some delineation of what is meant by the term "professional." I shall not attempt to give an exhaustive definition of that term, but merely to indicate the basic ideas behind it so that we can proceed from there to take a look at what professional ethics means and what they have done with particular subjects. A statement issued by a group representing both the American Bar Association and the American Law School Association is instructive in this connection. It reads as follows:

A profession to be worthy of the name must inculcate in its members a strong sense of the special obligations that attach to one's calling. One who undertakes the practice of a profession cannot rest content with the faithful discharge of duties assigned to him by others. His work must find its direction within a larger frame. All that he does must evidence a dedication not merely to a specific assignment but also to enduring ideals of his vocation. Only such a dedication will enable him to reconcile fidelity to those he serves with an equal fidelity to an office that must at all time rise above the involvements of immediate interest.

Underlying that statement is a conception that those who are members of a profession are rendering to others a service which has important social consequences.

For purposes of discussion I have selected four areas, although there might be some debate as to whether all are professions. First

Professor of Law, University of Minnesota.

the bar; second, medicine; third, accounting; and fourth, real estate. Traditionally, the learned professions have been identified as law, medicine, and religion. But the term has come to be used by more and more groups claiming to be serving the public and assuming a responsibility for the service that is being rendered in the public interest. Two of the characteristics of a profession, then, are a recognition, as a group, that it is serving a vital public function and that this is being done primarily on a private business basis. The lawyer is in business for himself; so is the physician; so is the accountant; and so is the real estate dealer.

Along with this concept of public service goes a group responsibility for the assumption of those regulations of conduct which will inure to the benefit of that public interest. Behind all this is the recognition that private interest will often override the public interest when the two conflict. A profession will undertake to submerge the private interest. The lawyer can recommend unjustified litigation and get added fees. A doctor can recommend an unnecsary operation in order to get the added fees. But their professional ethics tell them that they must not permit private gain to override their responsibility to the public.

CODES OF ETHICS

This finds expression in codes of professional ethics. Each of these groups has such a code. The bar has had a code of ethics in written form since 1908. The medical profession has had its code of ethics since the time of Hippocrates some 2,000 years ago. The accountants have a code of professional ethics. A recent book by John L. Carey, Professional Ethics of Certified Public Accountants,1 is an example of the concern of certified public accountants with ethics. The latest code of the real estate dealers, which was written in 1962, is a revision of earlier codes. Each of these has a statement of the public service it is rendering. First, the bar:

The future of the republic, to a great extent, depends upon our maintenance of justice, pure and unsullied. It cannot be so maintained unless the conduct and the motives of the members of our profession are such as to merit the approval of all just men.

1 John L. Carey, Professional Ethics of Certified Public Accountants (New York: American Institute of Accountants, 1956).