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Real World Costs Associated with Ethics

On January 31, 2006, former Wal-Mart executive Tom Coughlin pleaded guilty for stealing money, gift cards and merchandise from the world's largest retailer. At the same time, Wal-Mart is also facing a class action lawsuit in California, with claims of discrimination against female employees. Taking initiative to turn the tide, Wal-Mart announced plans to hire a Director of Global Ethics, a position intended to design and reinforce a Code of Conduct across a network of more than 6,200 stores and 1.6 million employees in 15 countries. Wal-Mart is taking responsible action to turn the tides and public perception by addressing this important issue from the inside out, and from the top down.

By contrast -

• Kevin Hannon, formerly with Enron Broadband Services, testified that the former Enron Chief Executive Officer Jeffrey Skilling told other top executives, "they're on to us" when a small analyst firm produced a research note critical of the partnerships run by the then Enron Chief Financial Officer, Andrew Fastow. According to Hannon's testimony, "Fastow said, 'LJM is a good deal for me'." Jeffrey Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors. Enron founder Ken Lay faces seven counts of fraud and conspiracy. If convicted, both could serve decades in prison.
• Ex-Enron Accountant Richard Causey has already pleaded guilty to securities fraud in exchange for a seven year prison term, and forfeit $1.25 Million in 2005.
• Ex-Enron Chief Financial Officer, Andrew Fastow, agreed to forfeit $30 Million in cash and property when he pleaded guilty to two counts of conspiracy in 2004.
• Ex-Tyco Chief was fined $170 Million and sentenced to 25 years in prison.
• WorldCom was fined $750 Million for impact to retirement and savings accounts.

The Security and Exchange Commission requires companies to publicly disclose their Code of Ethics, as well as waivers of any material aspect of the Company's Code of Ethics. Companies must promote and implement ethical business "Best Practices" to stay in compliance with the law and remain competitive.

What are the Benefits of Good Ethics?

• Customer Perception - Build a reputation for being trustworthy and responsible with customers
• Business Partners - Negotiate more effectively and share common goals
• Increase Productivity - Improved Moral and Reduce Employee Stress, Theft or Sloth
• Avoid Destroying a Lifetime of Work in a Single Act - It takes years to build a good reputation, and one scandal to ruin it
• Avoid Penalties - Fines, penalties and prison apply for companies and individuals

Quick Quiz

1. Do we have a company Code of Conduct, and do I know where to find it?
2. Is it visible to my customers, vendors and partners?
3. Do I participate in any activities that I would not want or allow other employees to know about or do themselves?
4. Do I feel 'more entitled' to receive benefits, time off, gifts or activities than other employees?
5. Would I be willing to see my actions on the front page?

And the best question of all -

6. If I were accused of demonstrating GOOD ethical behavior, would there be enough evidence to convict me?

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Words of Wisdom

"If you don't trust your associates to know what is going on, they'll know you don't really consider them partners."
- Don Soderquist, Vice President, Wal-Mart

"It is not enough for reporting companies to simply have a code of ethics. No matter how well or beautifully the language of the code of ethics reads, if the code is relegated to the back of a policy manual or a cluttered web site, it is of no use. I submit tat having a code of ethics that is not vigorously implemented is worse than not having a code of ethics. It smacks of hypocrisy."
- Roel C Campos, Commissioner, US Securities and Exchange Commission

"There has been a tendency in the business world to confuse citizenship with philanthropy. They're not the same thing. Enron was a great philanthropist, and clearly was not a good corporate citizen. The heart of global citizenship is about ethics and conduct." 
- Debra Dunn, Senior Vice President, Hewlett-Packard

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You may distribute this article freely, print it, sell it, or include it as part of a package as long as it is intact, unchanged and delivered in the original format with acknowledgement to Executive Blueprints Inc.

About the Author:
John Mehrmann is a freelance writer and President of Executive Blueprints Inc., an organization devoted to improving business practices and developing human capital. www.ExecutiveBlueprints.com provides resource materials for trainers, sample Case Studies, educational articles and references to local affiliates for consulting and executive coaching. http://www.InstituteforAdvancedLeadership.com provides self-paced tutorials for personal development and tools for trainers. Presentation materials, reference guides and exercises are available for continuous development.

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