From Giving Ethics the Business

Journal of Business Ethics 7 (1988) 489-495
By Colin Grant, Professor of Religious Studies at Mount Allison University

ABSTRACT: The criminal conviction of Amway Corporation for evasion of Canadian customs duties not only belies the high ethical profession of its president, Richard DeVos, but his reissuing of the book which makes this profession, without mentioning the conviction, supports the view that ultimately ethics and business are pulling in opposite directions.

Amway may avoid pyramid charges on technicalities more than in substance. It does not pay sponsors directly for recruiting new distributors and it does not allow distributorships to be bought. However, there is no doubt that the success of Amway owes at least as much to its built-in incentive for expansion, selling its products vertically down the line, as it does to its horizontal sales of the product on it own merits.

However, whatever the structural room for abuse, it is clear that the President of Amway is keenly aware of the importance of the ethical for business.

"Over the long haul, businessmen who operate on the basis of greed and manipulation are not successful. Somewhere along the way most of them are done in by their own dishonesty and scheming. There are exceptions, of course, but I still believe that there is a certain justice in the world which rewards goodness and punishes badness [Richard DeVos with Charles Paul Conn, Believe!, 1985].

In fact, DeVos seems to subscribe totally to the goodness-success/badness- sorrow formula.

"Consequences are inextricably tied to behavior. Good behavior is automatically rewarded. Bad behavior is automatically punished. In either case, the underlying concept is that every individual is accountable to society--he is answerable for his own behavior" [ibid].

The denouement of the Amway integrity-success story was reached in 1983, when an Ontario Supreme Court Chief Justice fined Amway 25 million dollars, "the largest sum that a Canadian court has ever levied and one of the heaviest criminal penalties ever imposed against any corporation in the world" ["Amway Cracks--And Pays," Macleans, 11/21/83] for evasions of customs duties. Behind this conviction lay an elaborate scheme of dummy invoices, and even a dummy corporation, designed to underprice Amway products for shipment into Canada.

...There is no doubt that the president and chief executive officer of Amway were deeply involved in these developments. This is indicated not only by the magnitude of the operation, but by the nature of the corporation.

"Sole ownership has allowed the two owners to operate the company without being subject to the internal policies of a publically held corporation." [Conn, The Impossible Dream]. Given this, not simply legal but emotional proprietorship, there is no reason to doubt that the "two founder-owners stay impressively well-informed about the goings-on at Ada [the corporate headquarters on the outskirts of Grand Rapids] as well as on the field, and the influence of their personal, informal styles affects the entire operation" [Conn, The Winner's Circle].

This is not to say that the idea necessarily originated with DeVos and Van Andel, but it could not have been implemented without their endorsement. Apparently the reaction within the corporation was to blame the legal department ["Amway Cracks--And Pays," Macleans, 11/21/83]. But this hardly absolves DeVos and Van Andel in any way, since their legal department is headed by longtime friend, Bill Halliday, who "remains their chief counsel and the symbol of Amway's legal rectitude" [Conn, An Uncommon Freedom]. What is more, the corporation ignored the advice of its Canadian brokers, Border Brokers Ltd, to acknowledge that it had submitted fraudulent documents to Canada Customs, and of their Canadian accountants, Arthur Anderson and Co. of Montreal, who advised that HDC [the dummy corporation set up as part of the fraud scheme] did not satisfy arms' length requirements [Looking Into Amway's Empire, Macleans 9/6/82]. Both firms ceased to represent Amway. Clearly the corporation chose the advice it would follow.

The immediate public reaction of the Amway leadership was to deny the R.C.M.P. charges "volubly and at length" [Trouble For The Amway Family, Macleans 11/29/82]. They threatened to exercise their influence in Washington. "Canada was accused of launching a blatant 'anti-American trade war'." [ibid] The length of the denial extended to the range of the judicial process, until at the last minute Amway conceded in what the judge called "a deathbed confession of guilt" ["Amway Cracks--And Pays," Macleans, 11/21/83].

The conviction for defrauding Canada Customs was handed down in 1983. The book "Believe!", in which DeVos give the enthusiastic endorsement of integrity in business and of the unavoidability of ethical claims quoted above, was published in 1975. But this book was reissued in a "New Revised Tenth Anniversary Edition" in 1985, without any reference to the Canada Customs conviction. How can the president of a company which holds the distinction of having been fined "the largest sum that a Canadian court ever levied and one of the heaviest criminal penalties ever imposed against any corporation in the world" reissue a book two years later insisting on the indispensibility of honesty in business, without acknowledging his own complicity in such blatant dishonesty?

The most obvious explanation is that this was possible because of the foriegness of Canada, that is, because of the lack of awareness of, and interest in, what happens in Canada on the part of the the American media and people....It would be difficult to imagine his reissuing of his paean to honesty and integrity in business, if teh conviction to which his company was subject had been imposed by an American court.

For a corporation to compromise ethical principles is by no means unique, or even surprising. But when the president of a corporation which has been subject to one of the largest criminal penalties in history reissues a book insisting on the indispensibility of ethical integrity in business, without acknowledging that crime, this confirms the worst barbs of cynics about the antithetical nature of business and ethics. For not only does such profession ring hollow in the light of the unacknowledged violation of these very principles in practice, but that failure of acknowledgement inevitably appears to confirm the suspicion that ethical profession is being used as window dressing in the interests of power and profit. The function of business ethics then is to divert attention from the real lack of concern with ethics in the single- minded pursuit of profit. This is the real challenge of the Amway case.