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Good Behavior, Bad Behavior, Read All About It!

The ability to recognize, react and manage ethics issues in consulting benefits from seeing and debating examples of good and bad professional conduct. Here we post examples of ethics in business, management and consulting. In each example, consider what you would do - or could have done - to create or restore trust and ethical conduct.

Please comment. Do you agree the issue is significant? Did participants act appropriately? How would you advise them to act differently? How would you mitigate the impact or prevent a repeat of unethical acts? How will you use what you learned into your own consulting practice?

Send suggestions of news articles (with link) to ethics@imcusa.org.

 

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Top tags: ethics  business  leadership  trust  accountability  certification  CMC  corruption  FBI  greed  hegemony  legal  profits  survey  whistleblower  workplace 

Business Leaders Still Not Trusted

Posted By Mark Haas CMC FIMC, Tuesday, March 29, 2016
Updated: Tuesday, March 29, 2016

The age old question of "Does ethics pay?" returns again with a 2015 Gallup poll of how people rate the honesty of various professions. As usual, "nurses again topped the list, followed by pharmacists, physicians, and high school teachers. Journalists, bankers, and building contractors occupied the middle, and, as has been the case for many years, business executives were close to the bottom."

What is it about business executives that lands them in this position every year? Is it how the focus of business has evolved to be "beat the competition" instead of "serve the customer"? Is it that incentives are aligned to maximizing profits above long term health and effectiveness of the company? maybe it is just a reflection of a culture of selfishness played out in a corporate environment. For whatever reason, the implications for businesses, and those who advise them, are serious.

Regarded of whether "ethics pays" is your reason for being trustworthy in your company's ethical culture and practices, ethics does pay. More articles than needed have been written about how people prefer to do business with those who are honest. Commerce flows faster when we overcome district of others and get on with the tasks at hand. It is more pleasant to work in a company when we don't have to run to the lawyers to make sure others are not taking advantage of us.

Placing ethics above money may result in your prevailing over your business adversary or not, but at least you will "win" playing by the rules of a civil society. Deceiving another or using unfair advantage (and I don't mean just being better at some function or process) or insider information means you can put more points on the scoreboard but you really haven't outperformed anyone. And people know it, and will be less inclined to play with you next time.

This is where management consultants emerge as a powerful force to improve the culture and practices of ethics in a business. Setting the standard for ethical behavior goes beyond just "being good." It also does not mean you must be an "ethics consultant." It does mean that you assert that ethics are foundational to you and that you are bound by the IMC USA Code of Ethics (paragraph 11) to observe and report any perceived violations of law or business. You are not responsible for accusation or adjudication but you are in a unique position to notify the appropriate authority. This benefits your client's business as well as enhances your value as a trusted advisor.

See Business Leaders Get an 'F' in Ethics, Yet Again

Tags:  ethics  leadership  trust 

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Reinventing business "ethics"

Posted By Mark Haas CMC FIMC, Friday, February 19, 2016
Updated: Friday, February 19, 2016

For almost one hundred years, many businesses have asserted that shareholders are a priority for strategic, operational and investment decisions. More than a few executives say, "The purpose of a business is to maximize shareholder wealth." Without going into the history, much of this dates back to the Dodge v. Ford Motor Company court decision in 1919. Until that time, corporations were chartered with the expectation that they were acting in the interests of the public.

This case, filed by the Dodge brothers, was whether the Ford board could make business decisions that promoted interests other than that of maximizing shareholder value.  The case is often misinterpreted (and mistakenly taught in business schools) as setting a legal rule of shareholder wealth maximization.This is not what the case concluded and is not supported by empirical, logical or moral evidence. It has taken a century for business schools to recognize this mistake and start teaching that a company is obligated to maximize value to its stakeholders, including community, employees, vendors, business partners and the environment. Not all have gotten the memo but progress is evident and business school. 

This is not what the case concluded and is not supported by empirical, logical or moral evidence. It has taken a century for business schools to recognize this mistake and start teaching that a company's obligation is to maximize value for it stakeholders, including community, employees, vendors, business partners and the environment. Not all have gotten the memo but progress is evident and business school.

Through the mid-twentieth century, the rise of analytics strengthened the focus on wealth simply because it was the one thig that was measured and of high interest. All of the other, often far higher, costs and impact were externalities, rarely measured and often highly undervalued. The costs of the risk, if not direct damage, like those to the environment, public health, worker safety, consumer fraud, financial misdeeds, product failure or economic risk were not included in measures of shareholder wealth - which is easy to do if you don't measure or value them. But they are no less real costs incurred but by someone other than shareholders.

This has been called "shareholder hegemony," where only profits matter above all else. This corresponds to the rise of corporate influence - and money - in political campaigns and judicial decisions favoring corporate interests.  

Only when damaged parties started to demand that the companies that imposed these costs on them be held accountable has this tradition started to change. Although still in its infancy (witness the rapid growth of B Corps, which now include public companies in their ranks) there is a move for companies to include full costs in their calculations of ROI and maximize "stakeholder wealth." But in way too many companies, this desire to ignore other than shareholders and use the political and judicial process to entrench greater power in shareholder interests still is strong.

Ultimately, the desire to retain influence impacts ethical behavior, of both corporate executives and of corporations as a whole. This article dives into the issues of how we, as consultants, need to be more attuned to the ethical implications of our clients who are focused on profit above all else.

See Reinventing business "ethics": How corporate honchos gave themselves cover to be as rapacious as they wanna be.

Tags:  business  ethics  greed  hegemony  profits 

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What is Ethical Leadership and Does it Matter?

Posted By Mark Haas CMC FIMC, Friday, August 14, 2015

Companies make choices about how to react to events instigated by their own operations, those of their competitors and the marketplace. Where ethics often raises its head is when a company acts legally but not necessarily ethically. This article gives a few examples of the experience of the collision of ethics and law in Nestle and Barclay. The challenge comes mostly from companies who seem to think they are in business to maximize shareholder wealth and not why businesses really exist: to create and satisfy stakeholders, particularly customers. This article states, "There is now extensive evidence showing companies with ethical leadership that acting in a responsible, or principled way is likely to be far more successful, long lasting and and indeed profitable than less ethical ones.” 

It gives five reasons why this is so:

  1. It is moire profitable
  2. Protect the rand and reputation
  3. It is the right thing to do
  4. Customer trust and loyalty
  5. Investor confidence

Granted, some of these overlap, but the mounting empirical support for being ethical vs. “complying with the law” is hard to refute. 

See What is Ethical Leadership and Why Does it Matter?

Tags:  leadership  legal 

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Thinking About Money Leads to Bad Behavior

Posted By Mark Haas CMC FIMC, Thursday, June 20, 2013
Updated: Thursday, June 20, 2013

New research shows that people are more likely to act unethically when exposed to money related words. When subjects used money-related words, they were more likely to lie or behave unethically, regardless of whether the subsequent activities involved possible financial gain or not,

 Consulting relationship with clients are partly about money. The nature of the engagement itself, which is about improvement, is directly or indirectly about making the client more effective (if not more profitable),

This suggests that consultants may be particularly susceptible to unethical behavior in their dealing with clients or in their business dealings.

 Read more at  http://research.tdameritrade.com/grid/public/markets/news/story.asp?docKey=1-SN20130618005338&category=CorporateNews

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And the Ethics Survey Says . . .

Posted By Mark Haas CMC FIMC, Tuesday, June 18, 2013

This infographic nicely summarizes recent trends in business ethics. With data through 2011, some trends, like the proportion of employees witnessing workplace misconduct, remained relatively steady. Other indicators, like the proportion of whistle blowers who report retaliation in the workplace, have increased (in this case it is now 1 in 5 facing retaliation, up from 12% a few years ago.

 One third of those surveyed say their managers are unethical.Although the source of another fact is unclear, those active on social media are far more likely to be pressured to compromise their ethics as well as more likely to commit ethical transgressions.

The infographic is a concise visual display of data derived from the Ethics Resource Center 2011 Business Ethics Survey and the infographic was prepared by the Bolt Insurance Agency.

Tags:  business  ethics  survey  whistleblower  workplace 

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Corruption is Not Going Away

Posted By Mark Haas CMC FIMC, Thursday, May 16, 2013

Apparently all the collective efforts to improve ethical behavior through education and compliance aren't having the desired effect. Former FBI Director Louis Freeh says that "no matter how much authorities try to stop certain politicians, business people and others from stealing, he doesn’t "see any deterrent effect” because their behavior seems to be getting worse rather than better."

During his speech for the Miami-Dade Commission on Ethics and Public Trust, Freeh noted that many people — from workers in local governments to Washington, D.C., to Wall Street — have not learned life’s lessons that it’s wrong to lie, cheat and steal. "Corruption is endemic to the human experience,” he said, saying it goes back centuries.

One big problem is the difficulty of proving crimes of corruption, such as bribery, because they "are never committed at gunpoint,” adding that the greatest challenge is "to prove that a crime actually took place.”

Freeh said the country’s lack of ethics is out of control today. "It’s pernicious throughout our society,” he said.  "It’s in our sports programs,” added Freeh, who was hired by Penn State to investigate the university football program’s sex-abuse scandal. "It’s in our educational system,” he said, alluding to a school test-cheating probe in Atlanta.    read more . . .

Tags:  corruption  ethics  FBI 

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Does an 'A' in Ethics Have Any Value?

Posted By Mark Haas CMC FIMC, Wednesday, May 8, 2013

After years of scandals in which financial executives seemed to have little constraint to enriching themselves at the expense of their investors or the public taxpayer, business schools are stepping up ethics education.

However, it is unclear how classroom discussions of ethics relate to behavior on the job. After all, business schools have been teaching ethics for decades and it remains unclear how much has stuck with how many students.

Even with empirical evidence to the contrary, two-thirds of MBA students still believe that maximizing shareholder wealth is the purpose of a company. With this perception to pursue financial gain  at the expense of employee and customer welfare or environmental and community value, pressure to commit unethical acts is likely to continue. read more . . .  

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Some Political Consultants Play Both Sides

Posted By Mark Haas CMC FIMC, Wednesday, May 8, 2013

Following the recent events of political corruption in New York legislation, the appearance of unethical behavior among some political consultants raises even more concerns. A common practice is for political consultants, after working to get a client elected, will use their position and influence to lobby that elected official on behalf of new private clients.

There are political consulting firms who are also registered lobbyists. Although lobbying and ethics rules are in place, it is unclear whether these consultants are adhering to the principles of the laws.  Although consulting firms assert that they do not get any special treatment - not ask for it - from those politicians they helped elect, the appearance of a conflict of interest creates a level of mistrust in the relationship.  
 read more . . .

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Top 10 Benefits of Hiring a CMC

Posted By Mark Haas CMC FIMC, Wednesday, May 8, 2013

The Certified Management Consultant (CMC®) designation represents the highest internationally recognized standard in management consulting. This syndicated article summarizes 10 ways in which the CMC's ethical sensitivity and skills can benefit an organization. These include high standards, trust, accountability, results, and commitment to the profession.     read more. . .

Tags:  accountability  certification  CMC  ethics  trust 

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Financial Malfeasance Widely Known at Companies

Posted By Mark Haas CMC FIMC, Wednesday, May 8, 2013

One out of five employees is aware of financial manipulation in their company abroad, according to a new survey by Ernst & Young, and 42 percent of board directors and senior managers are aware of irregular financial reporting in their company. Financial Malfeasance Widely Known at Companies describes how employees of Europe, Middle East, India and African firms are well aware of their company practices. 

In addition, 57 percent said they believe bribery and corruption are widespread in their country. The survey also found that 38 percent of all respondents believe companies within their jurisdiction overstate their financial performance.

While incentives for malfeasance may be understandable, given pressures to perform, the culture underlying the ability to report it constrains a company's ability to control it. This study showed that, while most respondents know their company has an anti-bribery and anti-corruption policy, there is a gap between senior management and employees when it comes to the relevance and effectiveness of this policy. Sixty percent of directors and senior managers believe that their company would support people who reported cases of suspected fraud, bribery or corruption, whereas only 34 percent of other employees agree.

David Stulb, global leader of Ernst & Young’s Fraud Investigation & Dispute Services practice,said, "Our experience also shows that leaders of organizations that successfully manage the risk of fraud, bribery and corruption ask the difficult questions and demand answers, particularly about the financial reports they receive."

One wonders to what extent external management consultants are in a position to engage client executives to facilitate improved ethical culture and practices.

Tags:  ethics 

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