: The Laws and Ethics…. Who’s Kidding Who? by: Paul Shearstone Years ago I read an article by a renowned psychologist wherein he wrote his studies found one percent of all human beings would never lie, cheat

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The Laws and Ethics…. Who’s Kidding Who?

by: Paul Shearstone


Years ago I read an article by a renowned psychologist wherein he wrote his studies found one percent of all human beings would never lie, cheat or steal. One percent would always lie, cheat or steal and given the right set of circumstances, the rest of us would likely lie, cheat and/or steal.
I mention this to highlight the fact that, if we can buyoff on this one principle – sobering though it may be – we have then, a benchmark from which to begin to at least try to understand the denigration of ethics that lead to outcomes like Enron and WorldCom.
Most believe morality walks hand-in-hand with unquestioned ethics. A quick look-up in a dictionary for Morality reveals words like, ethical, good, right, honest, decent, proper, honorable, just, principled and so on. All good words, no doubt. Words too that describe what most of us – including Enron Exec’s - see in ourselves, Morally Upstanding.
Nevertheless, there is no shortage of those who climb high upon their perch in an attempt to [dare I say] distance themselves from the great unwashed by proclaiming their undaunted commitment to honesty and ethics all the while engaging in activities to the contrary. Foyer walls of most companies utterly ooze words of benevolence and righteousness – there only for others to see, but in practice, never to be followed.
To be fair, the great unwashed are not sacrosanct from unethical behaviors or from a reluctance to take ownership for actions deemed untoward. Even if it’s something as simple as misusing the Internet or pinching office supplies from the company stockroom.
The fact is, the Enrons and Worldcoms have not cornered the market on unethical behavior. Like it or not, moral degradation is systemic in today’s society.
In an attempt to enlighten us on the realities of true ethical behavior, USA Supreme Court Justice Potter said, [Ethics] “…is knowing the difference between what you have a legal right to do, and, what is the right thing to do”.
Omniscient words to say the least! Words that in theory make a whole lot of sense. In practice, however, one may point out to his Honor, when he is seated on the Supreme Court bench and asked to adjudicate anything, his moral and ethical position, is and will always be, compromised by one factor – in the end, what is LEGAL… what is the LAW?
Climb any pedestal he wants, in practice, his dedication to ethics is only words, like so many words used to make up so many smarmy Corporate Mission Statements that run juxtaposed to routine.
The Judge in this case, should not be criticized for knowing the fundamentals of true morality / ethics or for advocating the benefits therein. Neither should he be allowed to stand apart from anyone when clearly, in reality, he too is handcuffed by the very principle that challenges the rest of us - the thing that governs the outcome of most every ethical business decision – IS IT LEGAL? The decision to lay-off 1-100-1,000 or more employees; we can do it – but is it legal? The decision to withhold commissions, payables or taxes in order to weather corporate economically challenging times – Q: What are the legal ramifications?
The ethical dilemma regarding whether to cut back on contracted services to improve the bottom line and appease the shareholders – Ethics be damned – Q: What’s our legal position?
It’s not a pretty world and it serves no purpose in kidding ourselves by attempting to extirpate our own involvement by blaming the Business-Barons from the likes of WorldCom. Let’s agree, when faced with most ethical dilemmas, we all hide [if we can] behind the skirt of the lady who holds the scales of justice.
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The question still remains, however, how do the Enrons and WorldComs get so out-of-hand?
The answer is not all that mysterious, especially if you buy-off on what was written earlier - ... given the right set of circumstances, nearly all of us [from time-to-time] will take the wrong path.
It’s shortsighted to believe high-level executives get out of bed each morning thinking about how they can swindle the world, take unfair advantage or act unethically. Just the opposite! That’s not to say, however, just like in Supreme Court Justice Potter’s case, there are circumstances beyond their control that may unequivocally govern decisions, which may challenge their innate moral commitment to ethics.
For example; who among us cannot think of a boss we once had [have] who said to us something like, “I don’t want to hear how you’re NOT going to achieve what I asked and the company EXPECTS…. I only want to see RESULTS!”
In many cases like this and in practice, the decision we are left to make is, is our ethical position more important than keeping our job and putting food on the table for our family? It’s a tough world out there for those without a good job. So suck it up soldier! You’re only doing what you’ve been ordered to do! It’s not your decision! Somebody else will have to take responsibility for your unethical actions if the doo-doo hits the fan.
…. And we all then fall a little deeper onto the sword of ethics…
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Everyone’s for corporate and personal liability to include financial recompense and/or jail terms especially for those at the top entrusted by us to always do what is right. We must be careful tough. To level our sights only on CEOs or CFOs is to miss the real perpetrators by aiming too low.
Like us, CEOs have bosses too. They report the Board of Directors. Granted, Boards have shareholders to whom they are ultimately accountable, but in practice, the buck stops at the Board level where ethical decisions – bad or good – are made.
In the book, Built to Last: Successful Habits of Visionary Companies, Jim Collins and Jerry Porras speak to this issue by highlighting the [Board’s], “explicit emphasis on Fair return rather than Maximum return”.
Again, I must point out, fine words we can all embrace because they altruistically revolve around the Golden Rule of fairness. In general, however, they are not always practiced. Sadly, we live more today, an aberration of author *Ayn Rand’s existential position - there is no room for altruism in business.
Understand a CEO’s ethical dilemma when challenged with a take-it-or-leave-it Maximum return challenge. In the end, an executive’s lifespan is predicated on one thing: ‘carrying out’ or being ‘carried out’.
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My observation should in no way be construed as an endorsement for the illegalities engaged in by Enron / WorldCom or others still to be discovered. The point is, what they are accused of didn’t just happen overnight. Given the right set of circumstances, the right amount of time, the right global competitive business climate, the right protection under the law, these large companies evolved – learned to become what they are today.
Does that make them any less culpable? No! But it should serve more as a lighthouse warning that, a) This problem is more far-reaching - insidious - than we might once imagined, and, b) It Must be corrected – Quickly!
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On a positive note, there are and have been many reputable studies done on the positive impact of ethics in the workplace for example **Harvard Business School Professors John Kotter and James Heskett who studied the performance of 207 large firms over an 11-year period. In their findings they wrote:
Corporate culture can have a significant impact on a firm’s long-term economic performance. They found the firms with cultures that emphasized all the key managerial constituencies (customers, stockholders, and employees) and leadership from managers from all levels outperformed, by a large margin, firms that did not. Over an 11-year period, the former increased revenues by an average of 682% versus 166% for the latter, expanded their work forces by 282% versus 36%, grew their stock prices by 901% versus 74% and improved their net incomes by 756% versus 1%.
The net-net of this demonstrates companies that paid attention equally to customers; stockholders and employees outperformed those that didn’t and over an 11-year period garnered a net growth income factor of 756%. Ethics Pays!
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On the other hand, all the positive studies in the world will do little to stop the dismantling of morals and ethics as long as those who engage in unethical behavior are allowed to continue. It’s time Governments and law-enforcement agencies bring more pressure to bear on those who sit back comfortably at a distance [Corporate Boards] creating policies that stretch the boundaries of law and fan the flames of ethical undoing.
Stronger laws and penalties with teeth – financial and criminal – are needed to bring needed consequences to already financially comfortable Board Directors who, I think we’ll find out quite quickly, will be more willing to re-embrace the “Do Unto Others” principle that keep business strong and elevates the collective!
•* Ayn Rand: Author Atlas Shrugged
•** Jeffery L Seglin: Author The Good the Bad and Your Business

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