The Thin Gray Line Between
Black & White
Business Ethics
in
Today’s Credit World
Janice M Dahl
CAE
Anchor Management Group, LLC
Holding Fast to Sound Management & Effective Governance
These Situations Have A Commonality
• Ethical components
• Some also have legal components
So What’s The Difference?
• Fallacy: “If it’s legal, it’s ethical”
• Legal standards do carry an ethical obligation and
responsibility;
set minimal standards of impropriety
• Legal standards do not articulate or establish ethical
principles;
they do not say how one should behave
What are Ethics?
• Webster defines Ethics as the system of moral
principles dealing with what is good and bad and
with moral duty and obligation
• Ethics is a system of decision making
• Goes beyond character
• Goes beyond simple right from wrong
• Makes or breaks the successful business person
Stories of ethical
violations
sprinkle the news
• Personal
• Professional
• Political
Internet: Is it Ethical to Fool People
to Research How Easily They Can
Be Fooled?
Sports: Scandals Continue to
Dominate US Sports Pages
Politics: Ethics Controversies
Cost Confidence, Clout for Some in
US Politics
News: Death of Rescuers in Utah
Mine Collapse Prompts Ethics
Debate
News: UN Summit Ponders
Business Ethics Issues & Says
Graft Costing $2.5 Trillion/Yr.
How Did We Get Here?
– The Business Ethics Timeline
• Ethical Climate
• Major Ethical Dilemmas
• Business Ethics Developments
1980s
Ethical Climate
• Social contract between employers and employees redefined
• Defense contractors conform to stringent rules
• Corporations downsize and employee loyalty erodes
• Health care ethics emphasized
Major Ethical Dilemmas
• Bribes and illegal contracting practices
• Influence peddling
• Deceptive advertising
• Financial fraud (savings and loan scandal
• Transparency issues arise
Business Ethics Developments
• Business ethics begin to emerge as formal codes
• Some companies create ombudsmen positions and ethics officer roles
• False Claims Act (government contracting)
1990s
Ethical Climate
• Global expansion brings new ethical challenges
• Major concerns about child labor, bribes, environmental issues
• Emergency of Internet challenges cultural borders
Major Ethical Dilemmas
• Unsafe work practices in third world countries
• Increased corporate liability for personal damage (cigarette companies, Dow
chemical, etc.)
• Financial mismanagement and fraud
Business Ethics Developments
• Federal Sentencing Guidelines (1991)
• Class action lawsuits
• International business ethics emerges
• Board responsibility for ethics
• Companies begin considering ethics in annual performance
2000s
Ethical Climate
• Unprecedented economic growth followed by financial failure
• Ethics issues destroy some high profile firms
• Personal data collected and sold openly
• Hackers and data thieves plague businesses and government agencies
• Acts of terror and aggression occur internationally
Major Ethical Dilemmas
• Cyber crime
• Privacy issues (data mining)
• Financial mismanagement
• International corruption
• Loss of privacy – employees versus employers
• Intellectual property theft
• The role of business in promoting sustainable development
Business Ethics Developments
• Business regulations mandate stronger ethical safeguards (Sarbanes-Oxley Act of
2002)
• Anti-corruption efforts grow
• Stronger emphasis on corporate Social Responsibility and Integrity Management
• Revised Federal Sentencing Guidelines for Organizations
• Increased emphasis on evaluating ethics program effectiveness
The Ethical Climate in Business
• Never before have regulatory controls been so
tight on business
• Yet they seemingly do not foster the social and
personal qualities we seek
• Perhaps they have stimulated our ethical “core”
to do the Right Thing?
Core Ethical Values In Business
• 3 of 4 of the nation’s major corporations
have a code of conduct
• 1 of 3 offers ethics training
– 15% require employees to take it
• Some Tools at Work:
Corporate Values
Codes of Conduct
Ethics Workshops
Hotlines
Ethics Programs
Ethics Offices/Officers
Ethics Committees
Real World Ethics Stuff
• Disconnect between ethics and the bottom line
is a problem
• Ethical principles are less tangible than dollars
• Make the connection to reputation and integrity
as long-range benefits for company
• Unethical conduct has negative effect on
employees
• View of the top is critical to ethical
outcomes
Real World Ethics Stuff
• 52% of employees observed at least one type of
misconduct in the workplace in the past year
– 36% observed 2 or more violations
– 2005 Statistics are up 10%; Reporting is down 10%
• Employees who are in high-risk situations, those
asked to compromise the standards of their
organization:
– 94% observed at least one type of misconduct
National Business Ethics Survey
What Are They Reporting?
21% Abusive or intimidating behavior towards
employees
19% Lying to employees, customers, vendors or
the public
18% Situation placing employee interests over
organizational interests
16% Violations of safety regulations
16% Misreporting of actual time worked
12% Discrimination on the basis of race, color,
gender, age or similar categories
11% Stealing or theft
9%
Sexual harassment
When Are They Reporting?
•
•
•
•
•
Written standards of conducts
Training on ethics
Mechanisms to seek advice and information
Means to report anonymously
Discipline of employees who violate ethical
standards
• Evaluation of employees’ performance based on
ethical conduct
The Result for Your Company?
• Reduced exposure to circumstances which
invite risk
• Employees understand and can react
appropriately
Let’s Talk About YOU!
Your Ethical Style
Ethic of Justice
Abstract, impersonal principles:
• Justice
• Fairness
• Equality
• Authority
People with this style place value in:
• Moral principles
• Laws and policies and equal application
• No exceptions or special circumstances
• Worry about setting precedents
Disadvantage:
Can lose sight of the
“people” in favor of
some abstract ideal
Can be seen as
inflexible, cold,
uncaring or impersonal
Advantage:
Logical and impartial
Objective and fair
Higher standard than any one
individual
Let’s Talk About YOU!
Your Ethical Style
Ethic of Care
To reduce harm or suffering:
• Moral dilemmas involve conflict
of duties or responsibilities
• Focal point is always the individual
and particular circumstance
• Solutions must be tailored
• Equity fits the situation
• Exceptions are the norm
• Constrained by policies
Disadvantage:
Can lose sight of the
factors at place, longterm impact
Can be arbitrary
Advantage:
Responsive to suffering or harm
being done
Flexible, caring and subjective
An Ethics Decision Model
• Integrated into a decision-making model used
in your business
1. Define the problem
2. Identify the available alternative solutions to the
problem
3. Make the decision
4. Implement the decision
5. Evaluation the decision
An Ethics Decision Model
• Step 1: Define the problem
– Carefully, slowly
– Perspectives are tricky
An Ethics Decision Model
• Step 2: Identify the available alternative
solutions to the problem
– Three to five alternatives, or more, is better!
– Gets away from the “see it from both sides” mentality!
An Ethics Decision Model
• Step 3: Make the decision
– Acting alone
– Acting with a team
– You need a clear rationale
An Ethics Decision Model
• Step 4: Implement the decision
– You are doing something
– Action is the first real, tangible step
An Ethics Decision Model
• Step 5: Evaluation the decision
– The test is if the problem was fixed
– Were other problems created?
An Ethics Decision Model
• Step 6 Ethics Filters – PLUS
P = Policies – Is it consistent with my organization’s
polices, procedures and guidelines
L = Legal – Is it acceptable under the laws and
regulations?
U = Universal – Does it conform to the universal
principles/values my organization has
adopted?
S = Self – Does it satisfy my personal definition of
right, good and fair?
Why Is This Important?
•
•
•
•
•
Ethical problems emerge every day
They aren’t always big
They aren’t always black-and-white
Most emerge as a series of poor decisions
They sneak into your business and can
suddenly be very BIG
What If You Have Made A Mistake?
• Admit it and make it right
• Ethical issues live in the dark
• If your company has asked you to do something
unethical
– Know what to do
– Know when to walk away
So Now It’s Up To You
• Prepare personally
• Prepare your organization
• Commit to institutionalize moral and ethical
values
Questions & Discussion
Business Ethics in Today’s Credit World
Resources on Business Ethics
• National Association of Credit Management, Credit Research
Foundation www.crfonline.org
• Institute for Global Ethics www.globalethics.org
• Ethics Resource Center www.ethics.org
• Loyola Marymount University www.lmu.edu
• Anchor Management Group www.anchormanagement.net
Janice M. Dahl CAE, Anchor Management Group LLC
6336 Devonshire Ave., St. Louis, MO
jdahl@anchormanagement.net  www.anchormanagment.net