Business Ethics Takes On Greater Import Amid Increasing Scams

By Patrick Cataldo

Whatever happened to the golden rule of "Do unto others as you would have them do unto you"? In the fast-paced, technology-driven, global world we live in, ethics in business has become a serious concern, reduced to "who do you trust?"

Morality boiled over in late 2001 with Ken Lay and the Enron scandal. This disastrous financial scandal took down not only Enron as a company but also its auditor, Arthur Andersen. Investors and employees of Enron lost millions in savings and retirement. What was Ken Lay thinking when he led the company down this course of action?

It's the same with other financial scandals—Bernie Ebbers of WorldCom, Dennis Kozlowski of Tyco, and Gary Winnick of Global Crossing. What were they thinking? Did they not know right from wrong? Or did they just not care?

In 2008, Bernie Madoff was accused of conducting an elaborate financial scheme bilking individual investors, foundations, hospitals, and religious groups out of billions of dollars. Dubbed a Ponzi scheme, he had investors give him their money with the suggestion of guaranteed high returns. This scam came crashing down when his Ascot hedge fund faced $7 billion in redemptions.

Year after year, as the need for financial income and stability increases, you find more "get rich quick" schemes on the Internet, through phone calls, and in TV infomercials. Investors find out very quickly that such schemes aren't quick and won't make you rich. Many are no more than bait-and-switch scams that get you in for a low dollar amount and then upsell you to thousands of dollars.

Business opportunities and work-at-home plans ranked among the Federal Trade Commission's top 20 fraud complaint categories in 2007 (the latest figures available) with 11,362 complaints. Other schemes are designed to steal your identity.

Curtailing these scams is a never-ending crusade. As the economy gets more difficult, they will only increase. In an economic downturn like the one we are facing now, scammers come out of the woodwork because they know there are people out there who are desperate to make money. The Internet helps these scammers look legit.

What drives leaders and scammers to these behaviors? Is it greed, a misplaced sense of business values or just pure stupidity? Personal gain appears to trump doing the right thing.

In an article titled "Managing to Be Ethical: Debunking Five Business Ethics Myths," Smeal College of Business distinguished professor Linda Treviño and her co-author Michael E. Brown of Penn State address the issue that unethical behavior in business is simply the result of bad apples.

"Most people are followers when it comes to ethics," they state in the article. "When asked or told to do something unethical, most will do so. Bad behavior in business does not necessarily result from flawed individuals. More often, it results from an organizational culture that encourages or supports flawed behavior."

Where do you and your organization stand on this? Currently, supported by boards of directors and business and academic leaders, a focus on ethical compliance has grown in both companies as well as on college and university campuses.

Most large companies today provide business ethics information for new employees. Further, these companies provide formal training on business ethics.

All employees must sign an ethics acknowledgment form saying that they will abide by these provisions. This is done in conjunction with the annual performance review and attached to the review. No signed ethics training form, no performance review.

This is a clear reminder of how seriously companies take ethical behavior. I am personally aware of this at both Telcordia Technologies and SAIC (Science Applications International Corp.), where I was responsible for the ethics education and compliance program for 43,000 employees.

The Smeal College of Business at Penn State supports a strong business ethics policy.

With dedicated support from the dean, the college has an "honor and integrity" link on its main Web page, 15 video clips from prominent alumni, faculty, and students on the importance of ethical behavior, language in a course syllabus that lays out honor/integrity expectations from the faculty, guest speakers for the G. Albert Shoemaker Program in Business Ethics and much more.

There is no substitute for corporate and academic leadership role models with integrity, explicit ethics training, and support of employees who choose the high road. According to the Ethics Resource Center's poll of 3,452 U.S. employees in 2007, comprehensive ethics and compliance programs are more common in publicly traded companies (55 percent) than privately held companies (27 percent), with 80 percent of employees in mid-size to large companies having access to company hot lines to report ethical problems.

While progress continues to be made, there's still a long way to go.

This article originally appeared in the Centre Daily Times.