Originally published in CommPRO.biz

Business Ethics Is Not 

An Oxymoron

 

Every day all but a few of us go out into the world and try our best to do the right thing. That’s true in our personal life; that’s true in our workplace. Why then does it seem that all we hear about are the bad things? The Enrons, the Adelphias, oil spills in the Gulf of Mexico, bribes at Walmart, reckless bankers destroying the world economy. Given all that and more, how can we say “Business Ethics is not an Oxymoron?”

It has to do with what we human beings consider news. By and large we aren’t interested in the good stuff. Quiet day-to-day happenings occasionally make for an interesting feature story, but the front page headlines tend more toward mayhem, treachery, and such. We don’t go to the race track to see the drivers make left turns; we go to see the cars crash. We don’t head for the movies to see ordinary life. We don’t pick up novels about good folks doing well, but in real life good folks doing the right thing and doing well is actually the norm.

Several years ago two academics and a writer published Firms of Endearment documenting their research into business ethics. They set out to find companies that maintain the highest ethical standards. Companies that deal with all their stakeholders at the highest ethical levels: their customers, their employees, their vendors, their community, the environment and finally their bottom line, their lenders and shareholders. They found them, great examples, nice outfits to deal with and have around. However, the remaining question was, do they make any money?

It turns out that over the ten years prior to the Firms of Endearment study, the public companies that met their ethical bar returned eight times the Standard & Poor’s average. Not eight times the worst, eight times the average return. 

That’s pretty impressive. It shows that if you take care of everything else your bottom line will take care of itself. It doesn’t mean that it’s always easy to follow this path or that everyone who follows it will succeed. There are times when the right thing is not clear. Unforeseeable factors come into play, such as economic downturns, competitive issues, market trends; even a natural disaster like Super Storm Sandy can wipe out a thriving enterprise.

It takes smarts. It takes hard work. It takes courage to succeed. You have to be lucky and you have to follow the oldest of moral guides, the Golden Rule. That’s what ethics is really all about. Nor is it writ large that cutthroat bad guys won’t succeed. It just means that all things being equal, an ethical business model will dramatically outperform any alternative. Instinctively we know that; it’s why the vast majority of us are out there trying to do the right thing every day, enjoying the great feeling that comes from that effort win or lose.

 Too Slick To Jail 
 

 This OP-ED appeared originally in: CommPro.Biz

So let’s get this straight: energy giant BP pleads guilty to a flock of charges and faces the largest criminal fines ever levied, fines overshadowed by massive civil penalties and more fines. And the only people facing charges are four way-down-the-pecking-order guys? And that’s it? The $4.5 billion in fines is pocket change when viewed against BP’s 2011 profits of $25.7 billion (that’s about $3 million an hour). How about the executives at the top who pushed those below for more and more? Folks like whiner-in-chief Tony “I'd like my life back” Hayward, BP CEO for the three years leading up to the disaster. Why isn’t Hayward being charged with manslaughter?

Instead, the two top guys on the BP rig face manslaughter charges for the eleven people killed in the blast. Another executive is charged with obstruction. He is alleged to have lied about the amount of oil spewing into the Gulf. One relatively low-level engineer was arrested earlier, charged with deleting hundreds of texts from his smartphone that indicated a much higher flow of crude oil into the Gulf than the numbers the bigwigs were feeding the media.

Tony Hayward and other carpetlanders created a “Profits First” culture that led to corner cutting and the disaster. Tony got a golden parachute. He got his life back. There’s no way the families of the eleven workers can get their “lives back.” One family member observed that he never got so much as an apology. That during a Congressional hearing BP executives seated close by never even looked him in the eye, let alone expressed sorrow for his loss. That would suggest that the only loss they are sorry for is the cash.

The Supreme Court declared that corporations are people with the benefits we all enjoy. The BP situation exposes a massive problem with that decision. How do we punish corporate “citizens” whose reckless actions result in the death of flesh and blood citizens? Imposing fines hardly seems sufficient. But how do you jail these corporate citizens? Going after a few minor players is a joke. Even sentencing the CEO to jail –culpable as they might be– doesn’t fill the bill; they rarely deserve all the blame. There’s the Board of Directors; aren’t they responsible for policy? Lots of luck trotting them all off to the slammer. We don’t see an answer.

After all, we haven’t been able to bring the individuals responsible for the collapse of the world economy to justice. The banksters we bailed out are living high. They have proven too big to jail. It shouldn’t surprise us then that the true architects of the disaster in the Gulf are too slick to jail.

A Cost of Doing Business

This OP-ED appeared originally in CommPRO.biz

Back in July the American operations of Britain’s largest bank, HSBC, were found to be riddled with nasty stuff like laundering cash for Mexican Drug Lords, hiding funds from the IRS in far off India for wealthy Americans, providing US currency to a Middle Eastern bank said to be a source of terrorist funding, and generally thumbing their nose at American laws and regulators.

HSBC is by no means the only banking institution taking this stance toward our laws. Several European and American banks have pretty much followed the same path. We’ve hauled them up in front of Congressional Committees. In the case of HSBC their top compliance officer fell on his sword and resigned during a Senate hearing. So there is no question they are sorry. The question may be, sorry for what, sorry they got caught?

This whole business came up again last week when HSBC announced that they added another $800 million -bringing the total to $1.5 billion- to funds set aside for the fines they expect to pay. HSBC CEO Stuart Gulliver is reported to have told those on a media conference call last week (2012.11.05): “We deeply regret what took place in the United States and Mexico; a number of people have left the bank and have had clawbacks against their compensation.” Really?

While that makes great press, you don’t have to be an international banker to see that a couple billion in fines is pocket change in comparison to the money to be made flaunting our laws. Or put it up against the quarterly pre-tax profit HSBC announced the same day, $5 billion, and that was below analysts’ expectations. What was the impact of all this bad news? More fines? Only $5 billion? One bad day on the London Market; HSBC’s shares fell 1.3%. Big deal. Big nothing for them, these fines are no more than a cost of doing business. 

It’s going to take more than fines to deal with these out-of-control, profit mad international and American banks. This kind of behavior reflects the corporate culture emanating from the top. Until those who head these organizations are called to task, nothing will change. Criminal charges against the CEOs and other top executives, however, will put a stop to these practices. After all, if they choose to defy our laws, fund drug lords, terrorists, tax dodgers and other low life types, they should face the same levels of punishment as the scum they are funding. 

Ethical bankers who work to serve their customers and communities make up the majority of our banking sector. They shouldn’t have to compete with banks that do not follow that model. Banking is too important to be left to those looking for a fast buck anywhere they can find it. There are lots of good people toiling at HSBC and all the other banks big and small. In a few cases their leaders have deserted and betrayed them. It’s time to call those leaders to task. It’s time to return ethics to the forefront; to return ethics to the Board Room. A goal that leads to a more profitable enterprise at the end of the day. And a much nicer day along the way.

Walmart, Ethics & the Law

Walmart announced that Daniel Trujillo came on board last week (2012.10.29) as SVP and Chief Compliance Officer for Walmart International. It’s a new post and part of a restructuring of the retail giant’s legal structure. General Counsel Jeff Gearhart now heads compliance, legal, ethics, and investigations ops, according to published reports. They also added Jay Jorgensen, an attorney, as Global Chief Compliance Officer and FBI veteran Tracy Reinhold, as VP Global Investigations.

This reflects a flurry of activity triggered by the exposure of what looks like their widespread use of bribery in Mexico. If true it would open Walmart to charges under the Foreign Corrupt Practices Act (FCPA). Earlier this year (2012.02.21) in an in-depth investigative piece, The New York Times painted a picture of bribery fueling Walmart’s growth in Mexico. Tens of millions were paid to overcome any obstacle in their effort to fast-track new store construction across the country. It worked; twenty percent of the world’s Walmart stores are now in Mexico.

Walmart employees in Mexico who tried to alert headquarters “Carpet-Landers” were ignored or marginalized. When the top leaders could no longer turn a blind eye to the problem they did their best to minimize the issue. Their Investigations Unit was rebuked for being “overly aggressive” by then Walmart CEO, H. Lee Scott Jr., who is still on their Board of Directors. A few days later their report was shipped to Walmart’s Mexican headquarters never to be mentioned again.

These new hires and this consolidation in the headquarters legal office looks like an extension of the cover-up that has been at the core of Walmart’s response to the bribery scandal. Looking at their newly minted SVP, and Chief Compliance Officer for Wal-Mart International, Daniel Trujillo’s chief qualification for the job is pretty obvious. He was Chief Compliance Officer at oilfield services company Schlumberger Ltd. Our Justice Department just bailed on a bribery investigation involving Schlumberger, an outcome Walmart is probably hoping for.

There are a couple things wrong here. Compliance and ethics don’t belong in the same basket. Compliance has to do with the law; ethics falls way outside what’s legal. It’s about corporate culture and reputation. The corporate communications folks deal in that arena. Were Walmart really interested in fixing this problem, they would be focused on new hires to create a culture to repair their reputation.

You would think that the 2006 Hewlett-Packard Board of Directors spying case would burn that into the minds of every major corporation. Kevin Hunsaker, HP Senior Counsel and Director of Ethics and Standards of Business Conduct, green-lighted a stupid telephone spying operation. He thought it was legal, it wasn’t. Hunsaker and several others were charged with a felony; he pleaded no contest. From an ethics viewpoint this plan wasn’t even close to being OK, but that’s not the viewpoint lawyers work from. Ethics and reputation are not in their skill set.