Is Corporate Ethics an Oxymoron?

Amidst the financial meltdown over the last few years, there has been  a seeming breakdown of the ethics of corporate executives. Some observers believed that the regulatory changes under Sarbanes-Oxley legislation passed in 2002 would eliminate illegal and unethical behavior, but is that the case?

Joining Dennis McCuistion to discuss this and other issues surrounding this question are:

• Sharon Allen: Chairman of Deloitte LLP
• Todd M. Bluedorn: CEO of Lennox International,Inc
• Jared Richardson: Sr. Counsel of Energy Future Holdings

Todd Bluedorn tells us that essentially corporate ethics are about basic compliance, “you don’t lie, cheat or steal.” He believes that there is  more to this though, “It’s about selfless leadership…  and a balance, not just being selfish. It’s also courage and an internal and moral ability and willingness to speak to  truth.”

Sharon Allen tells us that the overall outlook for corporate America is good, it’s encouraging. Companies are focused on being good, ethical citizens, extending that to their employees and the individual stakeholders they serve. “It’s important to instill that… It’s too easy to say, ‘that’s business and that’s personal.’ No, ethics are ethics.”

Jared Richardson tells us that in any industry there is a code of ethics.  A company is its “Ethos – which develops from the people that make up the organization.”

Dennis mentions Enron, one of the biggest debacles and corporate bankruptcies in history and asks about Enron’s corporate ethics. He mentions that Jeff Skilling had been interviewed by us in 2001 and made  a point of referencing the companies 64 page ethics manual. Skilling also spoke to a group at Southern Methodist University that day- and  he shows a short clip of that presentation, asking “was a lack of ethics involved in the downturn of Enron?”  Todd’s comment:  “Skilling would have failed the selfless test!’

The guests agree it’s important to differentiate what has happened in the last 18 months from “just” ethical causes. The meltdown was as a result of much more-  structural issues and other fundamantal causes.

As Sharon reminds us regarding Sarbanes-Oxley,

“No oversight will ever solve internal  problems… It still comes down to  how an organization presents and governs.” Sharon cites a Deloitte study, that employees first look at “their  manager and then their direct supervisor for their moral compass,” before other factors such as positive reinforcement, compensation and their peers.

Todd reminds us that,”It’s important to have structure and compliance and to force people to face commitments. It’s not only relying on good people and leadership.”

Jared agrees, that yes, it’s about the tone at the top and the direction from senior leadership and establishing a culture of ethical compliance.  But, he says,

“It goes beyond that, beyond the legal limits, if you will. It’s more than just the folks at the top, it’s at every level. The person you hire today at a starting  analyst position may be a senior manager tomorrow.”

In response Dennis introduces a Pinkerton study that says 30% of the population  not only will steal if the opportunity arises, they will create an opportunity to do so. Forty percent will steal if there is little danger of getting caught, and 30% won’t steal at all.

The guests discuss the pressure that organizations are under to produce, most especially in business downturns. They touch on the global economy and how there may be “unique practices acceptable elsewhere but not here.” Yes, global organizations are coalescing around acceptable standards.

Statistics on why people make unethical decisions in the workplace are discussed:

• 80% Lack of personal  integrity
• 60% Job dissatisfaction
• 44% Financial rewards
• 41% Pressure to meet goals
• 39% Ignorance of code of conduct

They concur that at the end of the day- its still about personal integrity.

Todd Bluedorn leaves us with a thought that summarizes the theme behind this program, “If you live for today, you’re going to lose tomorrow.”

And a special thank you to the Institute for Excellence in Corporate Governance,University of Texas at Dallas, School of Management, (http://som.utdallas.edu/iecg/) for providing the guests for this 4 part series on Corporate Governance.

As always, thank you for joining us to talk about things that matter with people who care,

Niki Nicastro McCuistion
Executive Producer/Producer

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1808 – 11.15.09