Chapter One
Whatever Happened to Business Ethics?ON NOVEMBER 8, 2001, PEOPLE WERE SHOCKED WHEN one of the hottest companies ofthe booming nineties, Enron, admitted to using accounting practices that hadinflated its income figures by $586 million over a four-year period. Less thana month later, Enron filed Chapter 11 bankruptcy, and early in 2002, the JusticeDepartment launched a criminal investigation into the company''s practices.Investigators wanted to determine how much executives knew about the company''sstatus, as they told their employees to hold their shares of Enron stock, butsold more than $1 billion of their own. The company went belly-up, employees''retirement savings were all but wiped out, and millions of investors lost atotal of more than $60 billion. Investors were stunned. And then the questionscame: How could something like this happen? Why did it happen? Who let ithappen?
A few months later, on March 27, 2002, the circle of people talking about ethicsbegan to widen when the nation''s sixth largest cable company, AdelphiaCommunications, announced that it also had financial problems. Founder JohnRigas, along with his sons Timothy, Michael, and James, was accused of usingcompany assets as collateral for loans totaling $3.1 billion to make personalpurchases and finance family projects. After removing the Rigases, the companyrestated its earnings and later filed Chapter 11 bankruptcy. The value of itsstock plummeted. On June 3, 2002, Adelphia was delisted from NASDAQ. Even morepeople became worried about ethics in business. And more people were askingquestions: What kind of people would do such things? How could this happen?Could it happen again?
That very same day, Dennis Kozlowski, CEO of Tyco, was charged by the districtattorney of Manhattan in New York City with evading $1 million in sales tax onartwork and other items he had purchased for himself with company funds. Asinvestigators looked further into Kozlowski''s actions, they alleged that he andtwo other Tyco executives had looted $600 million from the company. The worryabout private unethical practices in business was becoming a very publicconcern.
Later that month, Time magazine declared it to be the "Summer of Mistrust" andreported, "Most Americans- 72% in the Time /CNN poll-fear that they see not afew isolated cases but a pattern of deception by a large number of companies."And that was before word got out about WorldCom, who announced that an internalaudit found improper accounting procedures. Their profits from 2000 to 2002 hadbeen overstated by $7.1 billion! And WorldCom said $3.8 billion in expenses hadbeen improperly reported during five quarters. The consequences: Seventeenthousand workers lost their jobs, WorldCom restated its financial results(wiping out all profits during those quarters), and shares of its stock fell invalue by 75 percent. And the questions in the mind of the public only increased:Why is this happening? How many companies are unethical? Whatever happened tobusiness ethics?
BACKLASH!
Most people are disgusted with the state of ethics in America. They are sick ofdishonesty and unethical dealings. UC Berkeley accounting professor BrettTrueman, who teaches at the Haas School of Business, remarked, "This is why themarket keeps going down every day-investors don''t know who to trust. As thesethings come out, it just continues to build." Of course, the problems aren''tlimited to just the business world. The public was horrified by the abuses thatoccurred in the Catholic Church and how the incidents were covered up. Many weresurprised by reports that Pulitzer prize-winning history professor StephenAmbrose had plagiarized passages from historian Thomas Childers for his book TheWild Blue. And those who watched the Winter Olympic Games in Salt Lake City wereoutraged when a figure-skating judge claimed that her decision had been coerced,altering the outcome of the pairs competition.
THE ETHICAL DILEMMA
Our disgust is now turning to discussion. People want to know: Why is ethics insuch a terrible state? Although there are many possible responses to thatquestion, I believe when people make unethical choices, they do so for one ofthree reasons:
1. We Do What''s Most Convenient
An ethical dilemma can be defined as an undesirable or unpleasant choicerelating to a moral principle or practice. What do we do in such situations? Dowe do the easy thing or the right thing? For example, what should I do when aclerk gives me too much change? What should I say when a convenient lie cancover a mistake? How far should I go in my promises to win a client? As humanbeings, we seem prone to failing personal ethics tests.
An ethical dilemma can be defined as an undesirable or unpleasant choicerelating to a moral principle or practice.
As human beings, we seem prone to failing personal ethics tests. Why do we dosomething even when we know it''s wrong? Do we cheat because we think we won''tget caught? Do we give ourselves permission to cut corners because werationalize that it''s just one time? Is this our way of dealing with pressure?
2. We Do What We Must to Win
I think most people are like me: I hate losing! Businesspeople in particulardesire to win through achievement and success. But many think they have tochoose between being ethical and winning. The Atlanta Business Chronicle reportsthat a group of executives came together recently at a leading company inAtlanta to brainstorm ideas for a three-day national conference to be attendedby several thousand sales employees. As the team shared ideas for differentsessions, a senior vice president of the corporation enthusiastically suggested,"Why don''t we do a piece on ethics?"
It was as if someone had died. The room went silent. An awkward moment later,the discussion continued as if the vice president had never uttered a word. Shewas so taken aback by everyone''s reaction, she simply let the idea drop.
Later that day, she happened to run into the company''s CEO. She recounted to himher belief that the subject of ethics should be addressed at the conference. Sheexpected him to agree wholeheartedly. Instead he replied, "I''m sure everyoneagrees that''s an important issue. But there''s a time and a place for everything.The sales meeting is supposed to be up-beat and motivational. And ethics is sucha negative subject."
That CEO isn''t alone in his opinion of ethics. It''s the old suspicion that goodguys finish last. They agree with Harvard history professor Henry Adams, whostated, "Morality is a private and costly luxury." Ironically, in today''sculture of high debt and me-first living, ethics may be the only luxury somepeople are choosing to live without!
Many people believe that embracing ethics would limit their options, theiropportunities, their very ability to succeed in business.
If I believe that I have only two choices: (1) to win by doing whatever ittakes, even if it''s unethical; or (2) to have ethics and lose-I''m faced with areal moral dilemma. Few people set out with the desire to be dishonest, butnobody wants to lose.
Many people believe that embracing ethics would limit their options, theiropportunities, their very ability to succeed in business.
3. We Rationalize Our Choices with Relativism
Many people choose to deal with such no-win situations by deciding what''s rightin the moment, according to their circumstances. That''s an idea that gainedlegitimacy in the early 1960s when Dr. Joseph Fletcher, dean of St. Paul''sCathedral in Cincinnati, Ohio, published a book called Situation Ethics. In ithe said that love was the only viable standard for determining right from wrong.The Executive Leadership Foundation states,
According to Fletcher, right is determined by the situation, and love canjustify anything-lying, cheating, stealing ... even murder. This philosophy spreadrapidly throughout the theological and educational worlds.... Since the 1960s,situational ethics has become the norm for social behavior. After spreadingrapidly through the worlds of education, religion, and government, it haspenetrated a new area-the business world. The result is our ethical situationtoday.
The result is ethical chaos. Everyone has his own standards, which change fromsituation to situation. And that stance is encouraged. A course entitled "TheEthics of Corporate Management," offered at the University of Michigan, says inits description, "This course is not concerned with the personal moral issues ofhonesty and truthfulness. It is assumed that the students at this universityhave already formed their own standards on these issues."
So whatever anyone wants to use as the standard is okay. Making matters worse ispeople''s natural inclination to be easy on themselves, judging themselvesaccording to their good intentions-while holding others to a higher standard andjudging them by their worst actions. Where once our decisions were based onethics, now ethics are based on our decisions. If it''s good for me, then it''sgood. Where is this trend likely to end?
A CHANGE IN THE WIND
Fortunately, there is an increasing desire for ethical dealing in business.Executive recruiters Heidrick and Struggles state, "In a new era for business,CEOs face a new mandate. Glamour and glitz are out. Transparency-in terms ofethics, values, and goals-is in." My friend Bruce Dingman, president ofmanagement consulting firm R. W. Dingman, agrees. He recently sent me an e-mail:
Thought you might like to know what we are seeing in the marketplace. Changes incorporate values or strategies are often reflected in what our clients tell usthey now seek in candidates.... Yes, they still want key executives who can makethe company money, are willing to make tough decisions, and fit the managementteam, but now there is a stronger concern for integrity, not playing it quite asclose to the edge, and taking a somewhat longer view in strategies and thesetting of more realistic, more conservative goals.
And Jeremy Farmer, a seasoned recruiter at Bank One in Chicago, says that he andhis colleagues are taking ethics into greater account when looking for potentialemployees: "We''re asking the ethics-type questions, and we''re doing behavioralinterviewing."
It''s good to know that there is a desire for change regarding ethics in ourculture. The bad news is that most people don''t know how to make thattransition. Their situation is like that of a group of passengers in a cornyjoke I heard many years ago. The people were on an airplane during across-country flight. About two hours into their journey they heard a voice sayover the loudspeaker, "This is your pilot. We are currently cruising at 35,000feet at an air speed of 700 knots. We have some bad news and some good news. Thebad news is we''re lost. The good news is we''re making excellent time."
SOME CURRENT MARKETPLACE SOLUTIONS
If you look at what''s happening in the marketplace, you''ll see that even thoughwe desire honesty and plain dealing, we''re still not winning the battle ofethics. Take a look at how people in our culture are currently trying to addressthe problem. They ...
Teach Remedial Ethics
When universities admit students who can''t do simple algebra, they send them toa remedial math class. According to Joan Ryan, columnist for the San FranciscoChronicle, businesses are taking the same kind of approach. They''re forcingtheir employees to take remedial ethics. Companies are hiring firms to offeronline ethics classes and consultants to produce huge ethics manuals that Ryansays "often read like tax codes, complete with loopholes and fine print." It''snot helping. Worst of all, the desire of such companies often isn''t to maketheir businesses more ethical. Ryan states, "It''s about evading punishment.Under federal guidelines, companies that have ethics programs are eligible forreduced fines if convicted of wrongdoing."
Perform an Ethical Flea Dip
Another approach is to "treat" ethical offenders when caught. Managementconsultant Frank J. Navran calls that an "ethical flea dip." The problem withthis approach is that it is as effective as a flea dip when a dog''s environmentisn''t changed. The fleas come right back. If the environment-the systems andgoals-of an organization encourage and reward unethical behavior, then merelyaddressing individual employees'' actions will not improve the situation.
Rely on the Law
Some companies have given up entirely on trying to figure out what''s ethical andare instead using what''s legal as their standard for decision making. The resultis moral bankruptcy. When Kevin Rollins, president of the Dell ComputerCorporation, was asked about the role of ethics in business, he paraphrasedRussian dissident Aleksandr Solzhenitsyn, who said, "I''ve lived my life in asociety where there was no rule of law. And that''s a terrible existence. But asociety where the rule of law is the only standard of ethical behavior isequally bad." Rollins asserts, "Solzhenitsyn said that if the United States onlyaspires to a legal standard of moral excellence, we will have missed the point.Man can do better. I thought that was a nice comment on the ethics of companiesthat say, ''Well, legally, it was just fine.'' We believe you have to aspire tosomething higher than what''s legal. Is what you''re doing right?"
THIS TIME IT''S PERSONAL
One of our problems is that ethics is never a business issue or a social issueor a political issue. It is always a personal issue. People say they wantintegrity. But at the same time, ironically, studies indicate that the majorityof people don''t always act with the kind of integrity they request from others.Among college students, 84 percent believe the United States is experiencing abusiness crisis, and 77 percent believe CEOs should be held responsible for it.However, 59 percent of those same students admit to having cheated on a test. Inthe workplace, 43 percent of people admit to having engaged in at least oneunethical act in the last year, and 75 percent have observed such an act anddone nothing about it. The same person who cheats on his taxes or steals officesupplies wants honesty and integrity from the corporation whose stock he buys,the politician he votes for, and the client he deals with in his own business.
The same person who cheats on his taxes or steals office supplies wants honestyand integrity from the corporation whose stock he buys, the politician he votesfor, and the client he deals with in his own business.
It''s easy to discuss ethics and even easier to be disgusted with people who failthe ethics test-especially when we have been violated by the wrongdoing ofothers. It''s harder to make ethical choices in our own lives.
Continues...
Excerpted from Eticaby John C. Maxwell Copyright © 2005 by John C. Maxwell. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
