Ethics in business: Bad for your career
by Harry Heidelberg
For me, ethics are something deeply internal and individual. I think they are something quite fundamental, formed at a very young age, and best imparted by parents and older role models.
For some, even those who are taught well, the ethical compass goes haywire later in life. Greed and self interest are the biggest enemies of ethics. It’s mainly for money but it can also be for sex or power.
Failure to act ethically is at once a betrayal of another person or of a system/institution. Ultimately I believe it is even a type of self-betrayal of the individual who behaves unethically.
In one way or another, those who act that way will pay an individual price. The price may be one of emotional turmoil created by a complicated life or something as simple as the stress of being afraid of discovery. Nothing in this life comes for free. Except the truly priceless, good things (like happiness, love and trust)!
I’ve faced several ethical dilemmas in my working life. In one I was involved in the audit of a government bank in a developing country. It was clear to me that the financial statements of the bank were the proverbial croc of shit. I made this known to all involved and suggested massive asset write downs.
I became hated. I recall in one instance when we tried to value a bank asset of a resort in a hopeless location where nobody ever stayed. I was deeply suspicious. I said to a mate who had lived in the country for years, “How much do you think that hotel is worth”?. His answer was “How much is a big house worth in that area?… It’s worthless as a hotel”. I came to this conclusion about many assets – all basically worthless or certainly worth a fraction of their book value. Millions of dollars were involved. Lots of vested interests. Lots of big fish in a small pond.
How did I process the above? I convinced my boss in the developing country that we had no choice but to convince the bank to agree to massive asset writedowns or refuse to sign the audit. To cut a long story short, he agreed but was later overruled by the developed country headquarters of our firm. I resigned but “came back” on the condition that I would not sign anything associated with that audit. The end result was that relationships were poisoned by my failure to tow the line of Big City, Developed Country, Big Accounting Firm. My career in that firm was never the same again. It’s hardly a Hollywood ending but I’m still glad I did that. My reward was internal. I could live with myself.
I later learned that everyone in that country’s administration was corrupt and later the bank collapsed. I did my job, or at least tried to. What a pity others didn’t. I suppose I could and should have done more. I made my personal protest, but I admit that by not going public, I weaken my superficially pure stance. This is a good reason why we need sound whistle blowing systems. A whistle blower should not have their life destroyed. A career setback is one thing, but not a destruction. Veiled threats aren’t a good thing either.
In the case above, the situation was dire and people were involved in covering up bad financial news. I now know some were criminals. This is the classic scenario.
In another case, I was working for a foreign multinational. We had a particularly good year. We had way past what we needed for all senior management to get their bonuses. I was asked to cover up GOOD financial news. The idea was that we should report all we needed as revenue and profits in one year to get to the bonus level and then give the following year a kick start by shunting the part we “didn’t need” into the following year. I had some of the worst professional arguments I have ever had over that one.
I can be pragmatic as anyone but I would never have done what they wanted me to. In effect I would have been telling the headquarters (and for that matter the Australian authorities – tax and ASIC) that our revenue and profits were MUCH lower than they actually were. It was millions, again. All around me they were saying it was harmless because we were only “delaying” good news into the next year. It was just a timing thing.
Bullshit. Accounting is all about timing and if you can’t get the timing right you may as well give up. In effect we really had to say that inventory which was SOLD was still in our warehouse. They dressed it up in fancy language but that was the substance of it. My boss said that we had to do as we were told. I said no we don’t and I won’t. He asked whether I would resign if they went ahead with this plan and I said I would. I was under IMMENSE pressure. Not sleeping, filthy looks in the corridors etc etc.
That’s the part that stinks. Why should I resign for doing my job?
How did I process that one? I had a contact in headquarters I trusted. I told him about it and he said to do the right thing. Much to the fury of local people, I DID do the right thing. In the process I lost my most valuable staff member. He resigned in the midst of it because he too was ethical and couldn’t bear it anymore. I tried so hard to convince him to stick with me and that I would fix it.
In the end I got my way, I fixed it and the right results were reported. Again, relationships were poisoned. This story has a happy ending. Well, sort of. The headquarters contact arranged for a promotion and transfer for me to the headquarters. He was later screwed over in a merger by dirty politics and both of us have since left the company.
Oh joy.
The new company I work for has an inspirational CEO. I know, I hear you moaning already. The days of inspirational CEOs are over. Not really. The right CEO for today is an ethical one. Long term interests of all companies and organisations are to behave ethically. Really.
The CEO of the company I now work for has established an “ethics ombudsman” in the headquarters. I suspect this move is a reaction to recent corporate scandals and a realisation that an internal process is required. Internal audit is hardly enough. We saw in Enron that internal audit questioned the practices but it did not help. Something more is needed. Something at a very high and very independent level. My current CEO should be commended. She is totally committed to ethics.
The idea of an internal “ethics ombudsman” is a great initiative but Margo I think your idea is a great addition. You can have an “internally independent” process but ultimately you need something which can be totally pure in the sense of giving more than just the appearance of independence.
It has to be pure independence in fact, not just appearance. An internal process will always be seen as something which is more easily compromised. I am not trashing internal processes. They are the first line and the most important defence. That said though, something more would be really nice.
Why not? All of us in the corporate world need to pause and reflect. Mere tinkering is not enough. A revolution is required and startling initiatives are urgently needed. I want to be startled. I want to be energised by something totally new. Faith and confidence in the system is key. That can’t be regained without substantial, far reaching changes.
Training is needed. Some have forgotten and need to be retrained in the ways of ethics. Some of it is indeed nuanced. That is why a discussion is helpful. We can never have enough discussion about this. It will never go away. I’m no saint and I’m all ears.
And don’t believe existing bodies when they say they have it covered. I belong to one which has a members ethical counselling service. A mate of mine went to them in dire need of advice earlier this year and they were hopeless. They offered no help at all. The whole thing is window dressing crap. When you really need them, they won’t be there for you.
This mate of mine had to resign from his job to get out of his ethical dilemma and endure three months of frightening unemployment. Some people may treat this lightly but I think it is outrageous that a well known professional body has a so-called ethical counselling service that failed so abysmally. Sure, it may be an isolated case but it should never happen. In the case of my mate it was serious stuff. His employer was on the verge of bankruptcy and hadn’t paid “group tax” (ie the pay as you earn tax deducted from employees) in nearly a year. No one cared for him. He’s a good guy and no one cared or listened. He could only trash himself to survive and sleep at night.
I have become somewhat jaded, but live in hope.
Finally, I say show no mercy to those who act unethically. Absolutely none. A bit of carrot is nice but I reckon only a lot of potential stick will be the thing that will get some people acting ethically. Sydney’s full of crooks.
More people like Fels in this life would be good. A man with a mission. Less of the eastern suburbs set would be even better.
We urgently need a long, open and detailed debate on ethics. We did NOT learn the lessons of the 1980s. Are we to learn the lessons of the late nineties and early 21st century?
We have to or the system will not recover
PS: An open discussion on nuanced issues would also be nice.
This article was first published in ‘Your ethics’, webdiarySept10