Black cards? That deserves a red card!

Spain was rocked last week by another ethics scandal: the use of black credit cards by the top management of the Spanish bank Caja Madrid-Bankia. (Please note: business ethics is not only about scandals; it also focuses on preserving a solid culture within business organizations and markets in order for them serve the common good. But these regrettable circumstances give us the opportunity to discuss practices and policies that we may be faced with sooner or later.)

It is a long story, but one worth revisiting: Caja Madrid, once the largest savings bank in the country, was later transformed into a new commercial bank called Bankia. As a savings bank, Caja Madrid’s corporate governance was formed by politicians, trade unionists and other social representatives, along with various other professionals. Rodrigo Rato, Spain’s former minister of economy and head of the IMF, was the president; and Miguel Blesa, the CEO. Both are facing legal proceedings for their mismanagement of the bank that incurred severe losses for its stockholders.

Black Cards
Source: US federal Government

The general administrator issued all board members black credit cards with very generous and opaque access to money. Last week the lists of personal expenses were published, showing that nearly all of the executives made extensive use of the cards, for purposes completely unrelated to their duties as representatives, and sometimes to support scandalous lifestyles. Scandalous because those people were managing a socially oriented financial institution, and were ultimately bailed out with taxpayers’ money. Public opinion has been shaken by what appears to be shameful behavior and quite probably criminal behavior.

When facing this kind of morally inappropriate conduct, I think the most important question to consider is: how could these people possibly rationalize their conduct to the point of justifying it to themselves and their surrounding social group? I am assuming that these people are not “bad guys” all around or totally corrupt. I, too, could be in their position and end up behaving inadequately almost unwittingly. As German philosopher Carl Schmitt put it: “Power corrupts. This is true. But do not think you are good only because you don’t have power.”

Conventional psychology tells us that in the face of a conflict between our values and our conduct (“cognitive dissonance”), as human beings we do our best to self-justify our conduct with different rationalization strategies. Some of the possible arguments in business are pretty common: “I thought it was legal” or “I was told it was legal”; “everybody does it”; “I am not harming anybody”; “I need this to compensate my salary”; “I was following procedure”; “no one is going to notice”; “this is what it takes to work in this sector.” This can get worse if the immediate environment is also part of the justification process and feeds back into the rationalization. Not to mention that their coalescence could come from sharing interests or giving rewards.

How can we eliminate these forms of self-deceit and be fully aware of the ethical dimension of our conduct and practices? Here are some suggestions:

  • Avoid any black-or-white, defensive approach to ethical issues. We all have plenty of room for improvement. But it’s better to face our problems sooner rather than later. As they say, “a stitch in time saves nine.”
  • Be wary of yourself when you find those kinds of arguments steadily creeping into your mental landscape. Especially if the arguments need to be overstated. Oftentimes, self-justification creates a series of dubious practices.
  • Beware if there is someone in your surroundings or some memory or argument that makes you turn away. There may be some truth in what they are saying.
  • One way to gain perspective: imagine your reaction if somebody who is judgmental of you found out what you said or did. Would I feel at ease if the headlines on tomorrow’s newspapers were all about my actions?
  • Follow the rules. You are responsible for having direct knowledge of the laws, regulations and internal codes that govern your activities.
  • But those codes do not clear up all doubts, and in certain circumstances they may even include inequities, or requirements that are simply unfeasible in the real world. In such cases, we must be careful to apply sound common sense; seek advice from somebody with experience and objectivity. As the classics taught us: the measure of prudence is the prudent man himself.
  • If you find that the laws and codes available to you were inadequate, or that the common practices in your organization are less than acceptable, it is part of your responsibility to strive to change them, and at the very least disassociate yourself from any form of explicit cooperation.
  • Spend some time in front of the mirror looking into your eyes before going to bed.

I think that if the people involved had applied these measures consistently, they would have behaved differently. In fact, some of the directors did not use the cards at all. Perhaps they knew then what is now clear to everyone: whether or not using the black cards was legal, it was morally questionable .

Black cards? That deserves a red card!


About Ricardo Calleja

Prof. Calleja holds a Ph.D. in Legal and Political Philosophy from the Universidad Complutense de Madrid, where he graduated in Law. He has been a postdoctoral research fellow at IESE and a visiting scholar at the Busch School of Business (Catholic University of America, Washington, D.C.) and the Mendoza College of Business (University of Notre Dame, Indiana). He has done three summer research stays at the NYU School of Law (New York).