Ethics and Business, Part II

Thursday, June 19, 2008 | 1 p.m.

“Ethic” is a complex word with many different meanings. Merriam Webster Online defines an “ethic” as: “The discipline dealing with what is good and bad and with moral duty and obligation.”

Acting within one’s sense of moral duty and obligation sounds like an easy thing to do. But I’m sure that my sense of moral duty or obligation is different from yours. That doesn’t mean that I hold myself to a higher or lower standard; it just means that our standards are different. I believe I know when I act in a way that is illegal or unacceptable to our society. Beyond that, each of us defines the ethical boundaries for ourselves and our companies. How do we define those boundaries and how do we determine if we are acting ethically?

Early in my career, I worked for a firm that I believed was above reproach. The project team, of which I was a member, was faced with a dilemma. Our client was a public agency and the project budget was established at $45/square foot (this was a really long time ago, as you can see). During the course of the project, the team estimated the cost of the project at $60/square foot. After several redesigns and value engineering, the team was proud that the project had been reduced to a cost of $51/square foot. But clearly, we were still over the $45/square foot budget.

In team discussions, several ideas were brought up about what to do to resolve the budget problem. They ranged from telling the client that the budget was inadequate for its requests, suggesting ideas to reduce project scope, or asking the client to seek additional funding. Instead, our boss told the client that the project was designed within the budget. I’m not sure what the boss’s rationale was for making that decision. Even though I knew it wasn’t true, and with my intuition screaming that we were making a bad decision, I eventually agreed to go along with it, convincing myself that I didn’t have enough experience to argue with the senior leader of the firm.

Regardless of who was right or wrong about the estimate, I still believe that we should’ve brought the most current information to our client for him to make the decision of what to do. It was, after all, his project. Each day we are confronted with similar situations — situations in which we must choose to act with integrity, or not. I’m sure we all have stories of when and where the company in which we work has been confronted with situations where it must choose what is right over what might be right for the company. How we make these decisions affects the integrity and perception of our company and each of us.

A very wise person who I’ve known a long time once told me to use the “newspaper test,” which is: “Would you be comfortable with your mother reading about your actions in the morning newspaper tomorrow?” The piece of advice has served me well.

Wouldn’t it have been nice if executives from ENRON had used the “newspaper test” before they squandered away their employees’ retirement money? What about the subprime mortgage industry? Because people couldn’t qualify for traditional loans, certain lending institutions created a mortgage product for these people to gain home ownership. On the surface, this sounds like a noble thing to do, to help people realize “the American dream.” However, these loans were designed to maximize profits for the institution and were destined to fail from the start. Many people, who did not have the income to support their mortgage, got in over their heads, many of them losing everything they had, or at least losing “the American dream.”

I read about a woman who worked for an ammunitions manufacturer during the Desert Storm war. Although the company’s tests showed that certain types of ammunition had a high potential to explode in the rifle’s chamber during temperatures that exceeded 90 degrees Fahrenheit, it continued to sell this ammunition for use by our troops. It took this woman blowing the whistle on this company to stop production on what was clearly a very harmful product to our own forces. She lost her job, but rebounded nicely and is now the president of a very successful non-profit corporation.

We are often tempted to do things that might not be the “right thing to do” but rather things that could bring us wealth or prestige. According to Gary Zukov, author of “Seat of the Soul,” temptation is a good thing, as temptation allows us to ponder the consequences of our actions before we act. It helps us to make the right decision and it makes us stronger in the process.

I’d like to hear from you:

• Can you remember a time when you were tempted, but chose the right path?

• Have you ever been part of a decision that was unethical? How did you feel then? How do you feel today?

Until next time … Craig