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Thursday, May 17, 2012
Department: July 2006
Integrity Under Fire
When it comes to adhering to the law, the devil’s in the details
Story by Rich Ehisen
You have to forgive the cynical among us if we sometimes view business ethics in this post-Enron world as something of an oxymoron. But with all due respect to Sarbanes-Oxley, rarely is any respectable employee or company actually perplexed over whether or not to knowingly break the law. On the contrary, real ethical dilemmas often fall into the somewhat grayer area of workplace activities that are not illegal but perhaps push the boundaries of moral sketchiness.
Just what defines legal but sketchy behavior? The specifics may vary by industry, but there is little doubt that codified ethical standards as handed down by laws and company codebooks are alone not enough of a yardstick by which to measure ethical behavior.
“It’s always important to follow the law, especially in our business, but in reality the law is often just too vague in many areas,” says Pat McClain, co-founder of investment-advisory firm Hanson McClain, which has four offices in the Capital Region. “For example, there are a number of financial products out there that are perfectly legal to sell, but they are not appropriate investments for anyone. They are usury and don’t benefit the customer, so legal or not, we don’t sell them.”
Often it is not the consumer taking the hit, as sketchy tactics tend to come at the expense of corporate clients, mostly in the form of artificially bloated hourly billings or dicey expense claims.
“I’ve known consulting firms that charge clients for the cost of the consultants attending their own conference,” says Jack Gilbert, president of New Page Consulting in San Diego. New Page offers ethics-training services to a host of corporate clients, including CNA; Allstate; and Sears, Roebuck and Co. “I’ve also seen a consultant celebrate landing a big contract by charging a $4,000 meal back to the client,” Gilbert continues. “Those things may technically be legal, but they give some of us heartburn because we don’t think a client should be paying for that.”
Media outlets of all shapes and sizes are also far from immune to ethical challenges. But while stolen words tend to dominate the discussion of media ethics, the more far-reaching quandary isn’t plagiarism, and it isn’t particular to The New York Times or The Sacramento Bee.
A.G. Block, former publisher of the nonpartisan political magazine the California Journal, says the biggest ethical issue many media outlets face is the pressure to slant stories to placate big advertisers. Block says smaller publications that are financially dependant on keeping one or two major advertisers happy are the most susceptible to this often-intense pressure.
“I was once the editor of a small weekly newspaper in Idaho,” he says. “Our biggest advertisers tended to be locally owned supermarkets, and when we ran a story they didn’t like, they would sometimes pull their ads for a few weeks. That was a real financial pinch on us.” Block says that though he was able to resist that pressure, many publications are forced to give in.
Given these challenges, how can a company successfully integrate ethical behavior into its everyday business activity?
“Everyday ethical behavior is always driven more by an organization’s culture than by its code of ethics,” says Gilbert. “What happens in everyday work life results more from pressure to produce results and a reluctance to raise ethical issues — because of wanting to be a team player, not wanting to slow busy people down by asking awkward questions, or lack of confidence in our own opinions.”
McClain agrees that an organization’s culture is the key to keeping employees on the ethical straight and narrow. He notes, however, that the values espoused in that culture will only be put into real practice if they are constantly reinforced by the behavior of those at the top of the company food chain.
“It all depends on what the organization you work in will allow,” he says. “And that starts at the top.”
McClain says he and company co-founder Scott Hanson have attempted to bolster their ethical expectations through a company manual that details “exactly how we do business and the values we stand for,” which he says they also make a point of regularly emphasizing at company meetings. Those values include going beyond just obeying the letter of the law by adhering to its spirit and intent as well.
But Brian Moriarty, associate director for communications for the Business Roundtable Institute for Corporate Ethics at the University of Virginia, says the most detailed code of ethics in the world means nothing if it is not being followed.
“Enron had a wonderfully written code of ethics,” says Moriarty, “but it wasn’t really alive in the organization.”
That is, according to Gilbert, because companies like Enron often have an undercurrent of peripheral employee behavior, an unwritten code that subverts the ethics manual.
“After a formal orientation, including good words about ethics, the new employee often gets their real orientation of ‘how we do things around here’ from [his or her] new colleagues on the job,” he says. “The danger is that company standards may have eroded over time so that unethical behavior is now normal practice justified by a mantra of ‘everybody does it.’”
That problem can be especially difficult for young employees who have precious little capital built up on the job.
“Unfortunately, ethical issues don’t often come with red flags attached to them,” says Moriarty. “This is particularly true for people new to a company, especially young people. They may not always be able to identify what is really troubling them about a situation, but they know there is a problem.”
But while being the lone pup in a pack of battle-hardened wolves may be uncomfortable, it does not excuse doing something you think is ethically wrong, according to Jill Scofield, 26, an account executive for Sacramento public relations firm Lucy & Co. Scofield is also the ethics chair for the California capital chapter of the Public Relations Society of America.
“I think it is really important to have an occasional gut check,” says Scofield. “You need to trust your instincts. If you have serious questions about whether what you are doing is ethically wrong, you need to stop and re-evaluate those actions.”
Gilbert says regular evaluation is lacking in many companies. In spite of all the attention paid to the likes of Enron, he still doesn’t see the majority of businesses making the effort to address their daily ethical behavior.
“Most companies are only Sarbanes-Oxley compliant, meaning they are well set up to defend their actions in court,” he says. “But I don’t think very many companies are really taking on the cultural issues that make an organization ethical on a day-to-day basis.”
McClain agrees that addressing a day-to-day ethical commitment is also more than just writing down the company’s ethical standards.
“You can build structures that don’t encourage those behaviors,” he says, noting that, among other things, Hanson McClain does not pay their advisers on a commission basis. He also says that while some ethical questions may seem complicated at first, he thinks the answer to most dilemmas is relatively simple.
“For me, the rule of thumb is that if you wouldn’t feel comfortable talking about what you are doing with anyone, then don’t do it.”
