Posts Tagged 'Ethics'

August 3, 2007

Is Your Company Ethical?

Thanks to my financial brethren at Enron, Worldcom, Barings, BCCI and all the companies currently embroiled in the stock back-dating scandals, I have sit through an ethics seminar every other year to maintain my status as a certified public accountant.

In my position as Chief Financial Officer, ethics and integrity are of paramount importance and as a company, we work hard to hire staff with these characteristics. Keeping that in mind, a survey was taken in 2005 by Deloitte and Touche of American youth between the ages of 13 and 18 in which they were asked the question, “If your boss told you to do something you thought was unethical, would you do it anyway”? An astounding (at least to me) 53% of the kids said they would do what their boss asked them to do.

As a technology company with a work force that gets ever younger as kids become more and more technologically savvy, that is frightening statistic. However, what it points out is the need for us to set the behavioral standards and to train our staff in what those standards are.

What are those standards? For every company those will differ somewhat but a recent survey points out the types of unethical behavior every company faces on a daily basis. In 2005, the American Management Association’s Human Resources Institute asked companies why their employees behaved unethically. The top five reasons:

  1. Pressure to meet unrealistic business objectives
  2. Desire to further one’s career
  3. Desire to protect one’s livelihood
  4. Working with a cynical, demoralized environment
  5. Ignorance that the act was unethical

We have all faced having to make decisions in light of one or more of those five reasons at some point in our lives. How we have reacted to those situations has helped define each of us as we moved through our careers.

How will you know what the ethical choice is when you are trying to make a decision? Let me leave you with one final quote from Potter Stewart, former U.S. Supreme Court Justice on his definition of ethics:

Ethics is knowing the difference between what you have a right to do and what is the right thing to do.

Are you doing the right thing? And are you demonstrating that to your peers and those you lead? The world is watching.

-Mike

June 29, 2007

Business Ethics Simplified

In this day and age of Sarbanes-Oxley internal controls, SAS 70 certifications, and myriad other regulatory, compliance, and audit issues that I won't get into , business ethics might seem to be a lengthy and complex topic.

In reality, it isn't. Back in the dark ages when I strolled the halls of SMU, a crusty Econ 101 professor named Jack Stieber proclaimed that there is only one ethical mandate in business: "Within the bounds of the law, maximize profit." There are no more ethical rules necessary to follow in business.

I have heard others phrase a similar thought as "maximizing shareholder value". I disagree with that approach because there are things that management can do to influence the stock price that aren't necessarily tied to maximizing profit. Basically, if you can maximize profit, the stock price will take care of itself.

In response to Prof Strieber's proclamation, there were a few students who responded, "But sir, what about ?" and Prof. Stieber shot them all down. Here is one of the more interesting objections:

"But sir, what about a business owner who hikes the price of bottled water to a ridiculous level in a disaster-stricken area that has lost its water supply? Are you saying he's being ethical by maximizing his profit from price gouging?" Prof. Stieber responded something like this:

Assuming that his pricing policy is legal, he's still being unethical because he's actually not maximizing his profit. Sure, he may reap a short-term gain but when the water supply is back on, those forced to buy his extortion-priced water will take their business elsewhere. So in the long term, he hasn't maximized his profit and thus has behaved unethically. An ethical decision during that time might have been to keep selling water at the pre-disaster price or maybe even donating some to build goodwill among his customer base. This could have cemented a long term relationship with the customers who would provide repeat business again and again and thus maximize his profit over time.

That being said, when a business maximizes it's profit within the bounds of the law, it's a "win-win" for the customers, stakeholders, and shareholders. In my next post, I'll explain how SoftLayer earning profit is a win-win for both the customers and the company.

-Gary

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