What follows is from the 11/04/96 edition of the Wall Street Journal. Sorry, I didn't have time to HTMLize this:
Manager's Journal:
Five Warning Signs of Ethical Collapse
----
By Marianne M. Jennings
As a professor of business ethics, I'm often asked by
executives: What are the warning signs of a poor ethical
culture? These leaders want to know how to avoid an ethical
disaster of national-headline proportions. Lately my answer has
been simple: Do just the opposite of what the current
administration in Washington does. The Clinton administration
exemplifies the five principles I teach my students as signs of
an ethically challenged organization. Follow these principles,
and you're sure to have ethical lapses of the sort that lead to
resignation of the CEO or a precipitous drop in your company's
stock:
1. Surround yourself with subordinates who are young,
inexperienced, enthralled with power and deep in debt. The best
subordinates here are a full generation younger. Apart from
their willingness to scratch and claw their way to the top, they
carry the additional benefits of their lack of wisdom and their
financial dependency, which keeps them from challenging their
superiors. Shower the youngsters with salaries and perks, and
they'll heel. Charles Keating had his now-imprisoned youthful
minions, and Kidder Peabody had Joseph Jett, now facing civil
charges for allegedly manufacturing false profits. Bringing in
the youngsters to do your bidding allows you the unfettered
latitude of even illegal conduct should you so desire. Nick
Leeson was 28; Michael Milken surrounded himself with recent
college graduates.
George Stephanopoulos, Craig Livingstone and Dee Dee Myers fit
the profile to a T. The seasoned and independent David Gergen
didn't stick around long. And the parade of twentysomethings
testifying before Congress about their work with improperly
obtained FBI files shows what young subordinates can accomplish
when they don't ask questions.
2. Send a clear message that you expect results at any cost.
At Leslie Fay and Bausch & Lomb, managers, who were expected
only to make the quarter, engaged in creative accounting to meet
this goal. Leslie Fay went into bankruptcy after reported
stellar earnings turned out to be a $13.7 million loss. Bausch &
Lomb acknowledged in May that its 1993 earnings were materially
overstated and that the Securities and Exchange Commission is
investigating.
In the White House, boxes have been carted away from offices
under investigation, "I don't remember" testimony is the order
of the day, and competent government employees with unblemished
careers have been fired en masse with no twinge of conscience.
Protecting the Clintons and getting "our people in" were the
only results that mattered. Susan Thomases, Bernard Nussbaum and
William Kennedy are among those who took falls in pursuit of
Clinton goals.
3. Be certain the CEO and chairman are tyrannical and prone to
anger. When he was CEO of MiniScribe, Q.T. Wiles fired two
controllers as they stood in a management meeting. "That's just
to show everyone I'm in control of the company," Mr. Wiles said.
MiniScribe executives later broke into outside auditors' trunks
to alter records, and MiniScribe ultimately went bankrupt.
There's nothing like fear to force employees into ethical
minefields.
From the Clintons' Inauguration Day shouting match just
outside Blair House to the president's red-faced outbursts at
press conferences, it's clear the White House isn't Mr. Rogers'
neighborhood. Former White House staffer David Watkins wrote of
his fear of Mrs. Clinton's impatience in the event the Travel
Office purge was not completed. A health-care plan that will go
down with the Edsel in the annals of disaster managed to wind
its way through thousands of professionals without so much as a
peep about its sheer absurdity, cost or weight. Put a tyrant in
charge, and free thought and speech disappear. No one asks
questions, and things are bound to go terribly wrong.
4. When an employee's public statements bring criticism of the
company, cut the employee loose. Roger Boisjoly, a Morton
Thiokol engineer, was demoted after he revealed publicly that
he'd had reservations about launching the space shuttle
Challenger in cold weather and that his superiors had told him
to "take off his engineering hat and put on his management hat."
Similarly, President Clinton abandoned Justice Department
nominee Lani Guinier and former Surgeon General Joycelyn Elders
when their public statements drew controversy. The
administration then continued to pursue these women's goals --
racial quotas and lackadaisical drug policies -- with vigor, but
with accompanying denial.
5. When an ethical lapse is discovered, never admit anything.
Conceal, spin and gloss. Indignation and arrogance are your
friends. In 1986 Charles Locke, CEO of Morton Thiokol, said
dismissively, "This shuttle thing will cost us this year 10
cents a share." Following the Exxon Valdez oil spill, CEO
Lawrence Rawl scoffed at the environmental damage caused by the
spill: "There were 30 million birds that went through the sound
last summer, and only 30,000 carcasses have been recovered."
Donald Kennedy, once president of Stanford, said in response to
questions about using federal research funds for a yacht and
other luxuries, "The items currently questioned, taken together,
have an insignificant impact."
Likewise, Mr. Clinton dismisses every new revelation of
scandal as "politics." When questions are raised about his
wife's conduct, he says he wishes everyone in America had her
integrity. When all else fails, the president and his aides
characterize ethical breaches as "bureaucratic snafus" or much
ado about nothing.
Employees take their cues from the top. Leaders who act with
honesty and fairness set a similar tone for the corporate
culture. A company does not venture into the treacherous
territory of ethical minefields without a guide, who sets the
speed and approach. The guide must also correct the course when
it becomes clear the organization is on dangerous ground --
something the Clinton administration shows no signs of doing.
---
Ms. Jennings directs the Lincoln Center for Applied Ethics at
Arizona State University.
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