Promise Keeping

January 13, 2010 at 8:19 pm 3 comments

I am concerned about the apparently elastic understanding of promise keeping that seems to be so embedded in many of our businesses today.  The ongoing case of US Steel and its shutting down of its Canadian subsidiary is a good example of what I mean.  US Steel bought a Canadian steel maker, Stelco, in 2007. Canada is concerned about foreign ownership of certain industries like steel making. The concern centres around foreign owners shutting down recently bought Canadian firms. To protect Canadian interests, the Canadian government applied the Investment Canada Act to foreign purchases which, in a nutshell in the US Steel case, extracted promises from US Steel that, in exchange for approval of the Canadian government for the purchase of Stelco, US Steel would not shut down Stelco. US Steel made these promises and the Canadian government gave its approval for the sale of Stelco to US Steel.  Shortly thereafter, the world steel market contracted due to the world wide recession and US Steel subsequently, negating its promises to the Canadian government, shut down Stelco throwing thousands of people out of work. The Canadian government subsequently sued US Steel for failing to live up to its promise. This case is currently in court. US Steel is defending its promise breaking on the vagueness of the Investment Canada Act.

Whatever the outcome of this court case, US Steel has created an ethical problem for itself.  It broke its promise.  Initially, US Steel justified its promise breaking on the grounds it was making a business decision and that business decision took precedence over its promise to the Canadian government and to the steelworkers of Stelco (not to mention all the suppliers to Stelco who were also adversely affected by the decision to shut down Stelco).  US Steel was arguing its case from a utilitarian ethical standpoint – the consequences of the action confirm whether or not the action was ethical or not and the consequences of the action must benefit more than just the decision maker but also those affected by the decision maker’s decision – the greatest good for the greatest number.  In this case, US Steel looked solely at the consequences to itself and its bottom line as the measure of the rightness or wrongness of its decision to shut down Stelco.  It appears to have based its decision on a negative axiom of the utilitarian stance – the end justifies the means.  This is a dangerous ethical path for anyone or any firm to walk.

Ethics attempts to create trust so that we can work effectively with one another.  A cornerstone of trust is promise keeping – you do what you say you are going to do.  By trying to rationalize its decision to shut down Stelco, US Steel has shaken this value of trust.  If US Steel breaks trust by not keeping its promises to the Canadian government and to the employees of Stelco one can question its commitment to creating trust in relation to its bottom line.  Would it surreptitiously encourage its salespeople to offer, for instance, perspective clients delivery dates the salespeople know cannot be met just to close the sale? What is US Steel’s criterion for breaking trust in the former case but not the latter?  What does promise breaking do to the corporate character of US Steel?  The ethical danger for US Steel in selectively choosing to honour its promises is that it embarks on a slippery slope that adversely affects its well-being as a corporation that requires trust to be successful in a highly competitive and constantly changing market.

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A Tale of Two People

3 Comments Add your own

  • 1. Patt  |  January 15, 2010 at 10:12 pm

    Great insights! My personal experience is that companies, through their sales force, will promise anything to close a deal and then pressure manufacturing facilities and/or suppliers to either meet unrealistic demands, make excuses about missed deadlines or take the fall when they can’t deliver. Within Asia, contracts are a different animal and are regarded as a starting point for negotiations. I wonder, how is trust defined in an east/west relationship?

    Reply
    • 2. Philip Smith-Eivemark  |  January 19, 2010 at 3:52 pm

      I think in east/west relationships trust is usually defined by the client and those outsiders who observe what the stated promise was, was it realistic, and did the promiser ever intend to keep the promise in the first place.

      Reply
  • 3. Sarah  |  January 16, 2010 at 3:07 am

    you should send this to The Hamilton Spectator. my guess is it gets a lot of feedback.

    Reply

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