Good Ethics Must Become Priority for Renewal in Our Industry

Posted: 3/2003

Good Ethics Must Become Priority
for Renewal in Our Industry

By Wayne M. Thomas, D.B.A.

I sat in disbelief at George
Gilder’s Telecosm conference as our speaker, the CFO from WorldCom Inc.,
speculated about how WorldCom would right itself from bankruptcy. They
"restated" $9 billion in revenue and were newly separated from their
spiritual leader and former CEO Bernie Ebbers, who waltzed out with $400 million
in personal loans. The CFO had not mentioned the practices and lapses that had
crippled WorldCom. On the chance that he may have skipped over some notes, I
reminded him that many companies in the audience were undergoing ethics training
specifically because of the WorldCom debacle. Since WorldCom was the catalyst
for this, I asked him what changes had been made to prevent a recurrence. He did
not name a single change. He said only that the people responsible for the
problems were gone. This was no news to anyone in the room. What I hoped to hear
was the company’s initiatives around policies, procedures, oversight and

Some companies and their leaders are
like old machines trying to run new versions of software, but without the
upgraded hardware to do so. Our industry, once awash in capital, has become
noted for the chicanery of its executives, "independent" analysts and
"independent" auditors. The press has underexposed the damage done to
the thousands of hardworking telecom employees who invested their time and
talent only to become unemployed with worthless stock options. Nor has the press
sufficiently blasted the repercussions to the investors, real people like you
and me, who have seen nearly a trillion dollars in their investment in our
sector simply vaporize.

I’m told there are more than 300
laws on the books against fraud and corporate crime. The latest legal and
ethical lapses by firms such as WorldCom, Adelphia Communications Corp., Enron
Corp. and others inspired Congress to pile on more laws in an effort to manage
the misdeeds of business executives. If 300 existing laws haven’t done the
trick, is there any reason to believe the latest ones will tip the scale in
favor of justice for employees, shareholders or customers? Of course not.

From the story of forbidden fruit in
the Bible’s book of Genesis onward, fundamental character flaws make us
susceptible to greed and able to rationalize the actions that improve our own
interests. If laws don’t work and human nature is what it is, we must seek a
more effective way to restore our industry in the eyes of our customers,
shareholders and those we need to attract as employees.

Even a strict adherence to all the
laws will not make an industry or even a nation great. One hundred years ago an
English jurist named Lord John Fletcher Moulton observed ethics also are
required for greatness. He described the realm of ethics as in the middle of a
continuum with law and free choice at opposite ends. Moulton said the "true
test of a nation is the extent to which the individuals…can be trusted to obey
self-imposed law." Ethics is "obedience to the unenforceable."

Good ethics must become a priority
for widespread renewal and application by all who are affiliated with our
industry. A good step forward is adoption of these several ideas because they
make structural alterations in the system and they make ethical behavior a sine
qua non for conducting business:

  • Blacklist customers and
    suppliers with lousy ethics

  • Provide tools and training to
    handle ethical dilemmas

  • Strengthen checks and balances
    in corporate governance

1. Blacklist companies with lousy
"Everybody else does it" never worked on your mother and
is not a valid excuse for business either. Let’s look at what a few bad
decisions did for the giant Arthur Andersen LLP. This multibillion-dollar icon
was the first firm I’ve ever seen publicly executed because of its ethical
misdeeds, which emerged even before the legal issue of shredding documents
sealed its fate. Andersen became a corporate pariah. Because of the airing of
ethical lapses in the press, Andersen was blacklisted and watched its revenue
stream collapse in weeks. The lesson here is the market has the power to dry up
the revenue streams of companies with lousy ethics. The Andersen case serves as
a new standard of consequences for executives contemplating ethical or legal
sleight of hand. It also sounds a warning to the rest of us to be circumspect in
selecting the customers and suppliers with whom we work because their actions
reflect upon us. I hope Darwin’s principle of survival of the fittest will
compel boards and employees to stamp out mutant practices and drive those
responsible for them out of the corporate kingdom.

2. Provide tools and training to
handle ethical dilemmas.
Rush Kidder, founder of the Institute for Global
Ethics, explains there are no easy rules in ethics because decisions often are
between two admirable ends — justice vs. mercy, for example. I wrestled with
those ends many times in my former role as executive councilor to the governor
of Massachusetts where I weighed justice vs. mercy in cases where murderers
sought commutation of their sentences. Here, justice for the bereaved family and
citizens of the commonwealth was weighed against a repentant inmate with an
impressive record of rehabilitation.

In business, ethical questions are
often disguised and choices are not as stark as my "yes" or
"no" vote. Even where questions are clear, we often find ourselves
making choices between two good values without the tools to determine which one
is the greater good. For example, a 25-year employee, who works as hard as she
can, just can’t keep up with the needs of her trimmed-down company. She will
retire in a couple of years, but if she were terminated now, the odds are
against her finding employment in this economy. Two worthwhile values are
competing here: loyalty to an individual and loyalty to the community of workers
who must carry her load. Kidder, author of "How Good People Make Tough
Choices," says ethics training for all employees will produce better
results for everyone in a company simply by a common understanding of principles
involved in decisions such as the one above. Without this common understanding,
every employee makes his own call on ethical questions.

Take the real example of a CIO at a
company well known for its high standards. The CIO became incensed when a clever
sales rep sent him the shaft of an expensive putter and told him through voice
mail that he’d bring the club head when the CIO agreed to meet him. A minority
employee proud of working his way to the top, the CIO deeply resented an
implication that he would trade influence for a putter.

However, he remained blind to the
same ethical question arising from a different scenario. One measure of his job
success, he said, came from the amount of time he could comfortably spend away
from the office playing golf at nice clubs with preferred vendors. Clearly, they
too were seeking to buy his attention. He saw himself above influence, so he did
not equate the golf invitations to the putter. This principled CIO would benefit
by reflecting on his behavior with the backdrop of fresh ethical training and

3. Strengthen checks and balances
in corporate governance.
I still grin recalling a story of power and ego
involving Robert Allen, the former chairman and CEO of AT&T Corp. He and
several board members had flown together aboard a corporate jet to their
meeting. At the meeting, some sensitive issues arose and the board asked Allen
to leave the room while it considered them. The board apparently had not
excluded Allen before, and he angrily left the meeting — bruised ego, airplane
and all. He hopped aboard the corporate plane and flew home. If the board could
consider issues without him, those who had flown with him could also consider
how to make their own way home.

It is astounding to me that a
corporate officer would demonstrate such bald-faced disregard for the people
charged with managing him. The behavior demonstrates how power had fundamentally
shifted from the board to management. Shareholders are the company owners.
Company officers, no matter how big their britches, are hired to run the firm
for the shareholders’ interest. Many boards appear to have forgotten their
fiduciary responsibility as they succumb to the influential goodies provided by
their chairmen and CEOs. Whether a perk is a round of golf or a generous stipend
larded with private jet rides to exotic places, such influence over a board
creates an ethical dilemma.

To regain their integrity, corporate
boards must reassert themselves by shaking off their real or perceived
subservience to corporate managers in exchange for perks or largesse. Returning
the title of chairman to a nonoperating board member is one excellent way to
reestablish their role and responsibilities.

Beyond all the laws on the books,
there are means to encourage honest corporate citizenship. The financial loss
from losing one’s reputation, the value of training all employees to see with
the same ethical eyes and the return of true oversight by boards will help in
the war with human nature’s battle with greed.

Dr. Wayne M. Thomas is president
of Thomas & Company Inc., which helps companies make midcourse sales
corrections and develop sustainable direct sales and channel strategies. He also
is chairman of the Telecommunications Industry Association (TIA) services
channel group. He can be reached at


Adelphia Communications

Arthur Andersen LLP

AT&T Corp.

Enron Corp.

Thomas & Company Inc.

WorldCom Inc.


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