Recessions are part of the laws of economics. But unethical conduct can stem from poor leadership. While today's economic woes were caused by a multitude of factors, a major catalyst has undoubtedly been poor decision making at the regulatory and corporate levels, and in some cases outright dishonesty. Financial markets have been rattled, which in turn has cut off funds to borrowers and sent equity values south.


The introduction of public policy is one matter. The enactment of corporate codes of conduct is another. Business ethics can be a murky subject. Oftentimes, the rules that govern corporate proceedings are vague and unable to dissuade workers from crossing boundaries. In such cases, many ethicists argue that the failings lie not with the rank-and-file who are encouraged to play hard and maximize profits but rather with institutions such as corporations and government -- specifically the leaders who have facilitated moral lapses by turning a deaf ear or by not creating "fair" rules.


"Firms need to set up comprehensive ethics committees and spend the resources to make sure they are effective," says Tony Earley, chief executive of DTE Energy, at an earlier conference on energy ethics at the University of Notre Dame. "Given Enron, Adelphia and other scandals, how can any firm not afford to spend the necessary money?"


While corporate cultures and unclear standards may be the driving force behind wrongdoing, individuals who participate in questionable activities must still be held to account. If an area is gray, ethicists urge workers to abide by the Golden Rule and to envision the outcome publicized in the press.


In some cases, the herd mentality can triumph. That is, participants see others making a lot of money by engaging in dubious activities -- a condition that can push otherwise honorable people to commit questionable acts, say experts. The human psyche then works to rationalize that behavior by saying, "everyone is doing it" and therefore it must be alright. That's a factor that can transcend money and instead, prompt a desire to be accepted among one's peers. However, the experts add that people quickly come to their senses when law and order prevails.


New Hope


The most recent corporate tycoon to allegedly run amok is Bernard Madoff, who stands accused of ripping off investors by as much as $50 billion -- the biggest Ponzi scheme in the history of the world. Congressional hearings are now underway to try and determine how it could have occurred in the first place.


Meantime, a federal appeals court in New Orleans has recently upheld the conviction of former Enron Corp. CEO Jeff Skilling, although his 24-year sentence is to be reconsidered. Skilling, along with former chair Ken Lay, was convicted three years ago of fraud, conspiracy, insider trading and lying to auditors. As a result of the malfeasance, investors were wiped out and lost more than $60 billion in value.


In the case of Enron, business ethicists and corporate insiders say that while the company had codes of conduct, they were never enforced. In fact, the top leadership is accused by many of at least tacitly encouraging profit at all cost. "The regulatory environment in California begged for firms to game the system," says DTE's Earley. "The culture in Enron and other firms allowed dysfunctional conduct to continue."


Corporations must therefore practice what they preach. In the case of DTE, its ethical standards are detailed and focus on the company's core values that include customer service. The utility then works to instill those values in its workforce by example and through the use of dialogues with management. Beyond setting policies and training staff, the company also has an enforcement officer whose job is to function much like an internal auditor with respect to maintaining ethical behavior.


DTE has been tested. In the post-Enron environment, it had a situation in which the previous chairman, chief executive and chief financial officer had set up a consulting business that would have profited had the utility been bought out. But a system of checks and balances had been established -- one that paved the way for the company controller to notify the chair of the audit committee of the apparent conflicts.


"Our company wants to hear about problems before they put the company at risk," says Earley. "It also shows that the firm takes the opinions of employees seriously."


Most individuals were raised with a sense of ethics that began in their families. Those values were then enforced through their schools and religious institutions. And while honesty and decency have typically been applied in interpersonal communications, they can easily be forsaken in the business environment. Individuals who are tested must then listen to their "internal voices," says Earley, and either asks for clarification or if necessary, "walk away."


"The distinguishing feature of an ethical company is a visible statement," adds Patrick Murphy, marketing professor at the University of Notre Dame, at its conference. "The litmus test is the manner in which people can raise ethical issues in the company."


Surely, if profits can be made, schemes that attempt to skirt laws or cross boundaries will occur. It's been that way throughout history. Recently, there has been Enron and WorldCom. Now there's Bernard Madoff. But with each passing scandal, new rules and codes emerge that surpass those of the past. It all breeds promise -- the sense of hope that catapulted Barack Obama to the presidency and the very ideals he says will lift the country back to its feet.



 

Copyright © 1996-2006 by CyberTech, Inc. All rights reserved.