Executive Times

Volume 7, Issue 4

April, 2005

 

ă 2005 Hopkins and Company, LLC

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Integrity

If everybody claims to have integrity, why do so many of us seem to misplace it at times? After all, each of us tells a lie every now and again. What’s so bad about that? Most of the tax return is accurate, and the amount due is high enough as it is. “Everybody” uses up sick days. We ran this by legal and they said everyone in the industry does it this way; outside counsel confirmed that other clients use the same approach. Is there safety in numbers for ethical breaches? What ethical code says, “Majority rules?” When found untrustworthy once, what makes us think we will be extended trust again? By the time we find out that integrity is important, is it already too late? The business press has been full of stories in recent weeks about the consequences of a loss of integrity and pundits have provided lots of commentary on lessons to learn. Odds are you’re not under indictment for malfeasance, or being fired for conduct problems. We’ve selected a few stories for this issue that weren’t in the blaring headlines, and ask that readers consider the degree to which your own adherence to a moral or ethical code has been steadfast. Think about the culture of your organization, and compare what you and your colleagues really do versus what you say you do. A gap means a shortage of integrity. That’s a shortage that can be costly for you and for your organization. Reflect on what others have faced and make a plan to close your own integrity gap, even if it’s one that’s unlikely to make headlines.

 

Fifteen new books are rated in this issue, beginning on page 5. One book is highly recommended with a four-star rating; nine books are recommended with three stars; and five are mildly recommended with two star ratings. Visit our 2005 bookshelf at http://www.hopkinsandcompany.com/2005books.html and see the rating table explained as well as explore links to all books we’re reading or considering this year. Forty four new books have been added to the “shelf of possibility,” which now has over 200 books in queue. If there’s something missing from the bookshelf that you think we should be considering, or if there’s a book lingering on the “shelf of possibility” that you think we should read and review, let us know at books@hopkinsandcompany.com. We note that Fortune celebrates its 75th anniversary and in the March 21 issue picked 75 books that the editors say will teach us all we know. Check out their list at http://www.fortune.com/fortune/fortune75/articles/0,15114,1034780,00.html.


Somersaults

The audience of 1,200 securities lawyers for the SEC’s annual conference in early March received an ethics primer from the opening speech (http://www.sec.gov/news/speech/spch030405whd.htm) of SEC Chairman William H. Donaldson. Here are a few excerpts: “Honest markets depend on the integrity of participants and their advisers. Some aggressive participants – and compliant advisers – will continue to test the boundaries of new laws. Some will pursue questionable activity right up to technical conformity with the letter of the law or accounting standards, and some will step over the red line, perhaps with the help of a lawyer or accountant. The success of our mission depends on those of you who do not succumb to those practices. … An important part of your role, then, is to apply your judgment to new situations as they evolve. You will see them before we do. And you have the ability to address questions and issues before they erupt into quagmires. Indeed, it is in your clients’ interests to prevent their issues from becoming our problems. Your job, as the counselors of the actors in our financial markets, is to identify today’s issues and prevent them from blossoming into tomorrow's scandals. … think how much anguish we could have avoided if a few more lawyers had pointed out to their hedge-fund clients that late trading of mutual fund shares is illegal, as are duplicitous market timing and quid pro quo “sticky asset” arrangements. That sort of common-sense advice would have been more effective in keeping the client out of trouble than engaging in rhetorical somersaults to justify the activities the client wanted to pursue. … And most important, you can help corporate leaders to set a personal example, and insist that when a decision is made, no matter how large or small, everyone is obligated to check his or her internal compass and ask whether the course of action is the right thing to do.” The best executives ask for candid advice and useful counsel, and are careful to create an environment in which advisors can say what they want, not just what the executive wants to hear. The best advisors help prevent future problems, and speak with clarity, whether the client likes the message or not.


In asking for advice, do you communicate that you expect advisors to find a creative way to get done what you want to do, or are you open to being told not to do something? When asked for advice, are you likely to succumb to pressure to give the advice that is wanted, not necessarily the advice you think would avoid future problems? When selecting advisors, do you want help from those who will do what they are told, or those who will be independent?


Entitlement

When we read recent stories about increases in employee dishonesty, we were reminded of the late Mike Royko’s suggested motto for the City of Chicago, “Ubi est mea?” (Where’s mine?) Executives who receive certain perquisites that are intended as benefits can begin to blur the distinction between personal life and corporate life. For those who seem to work constantly, perhaps there is no line drawn, and that can make it a challenge to decide what is a personal expense and what is a business expense. Wal-Mart announced on May 25 that its former # 2 executive and others were fired following an investigation. “Following an internal company investigation, Thomas M. Coughlin has resigned from the Wal-Mart Board of Directors. The investigation relates to personal reimbursements, payment of third-party invoices and the use of company gift cards. Three Wal-Mart associates have been terminated in connection with the investigation, including one company officer.” Several media sources reported the amount involved was between $100,000 and $500,000. We may never learn what happened in this case, but it may reflect the failure to distinguish what’s corporate from what’s personal. We read in The Wall Street Journal on March 24 (http://online.wsj.com/article/0,,SB111162391698488207,00.html) that, “Employees calling in sick have hit a five-year high, and three-fifths of those who do so aren't sick at all, but are tending to personal needs or just feel entitled to a day off, says a 2004 survey of 305 employers by CCH Inc. … In another indicator, job applicants reporting false academic credentials have hit a three-year high, with 12% of resumes containing at least some phony information, according to the Liars Index, a survey by recruiting firm Jude M. Werra & Associates. … Some employees, of course, simply harbor a larcenous sense of entitlement. … While it's never OK to lie at work, the complexities of workers' lives thrust them into some sticky situations. Is it better to tell your boss you can't take a business trip because of nonexistent client appointments, or to admit that your spouse may take the next step toward divorce court if you go? There are some excuses bosses just don't want to hear. … What if the truth will do so much career damage that a face-saving lie seems better? … But any lie has hidden costs, not only in teamwork and productivity, but in an employees' own self-respect.” The tone at the top of an organization, and the example set by managers, provides clarity to all workers. If policies create obstacles to the reality employees face, changing policies may be a better solution that winking at widespread non-compliance. Bright lines between what’s corporate and what’s personal, combined with frequent examples of what’s acceptable and what’s unacceptable, will build a stronger workplace.

 

Have you created an environment in which those who report to you find it easier to lie than to give you a reality check? Given how hard you work, do you feel entitled to the occasional expense report padding to cover something you see as legitimate, but would raise some flags if described accurately? How bright is the line you draw between personal expenses and corporate expenses? When was the last time you had a workplace conversation about lying? Have your policies kept pace with the real lives of those who work in your organization?

 

Formative

Life experiences form our character, from youth through old age, and all our actions convey messages about who we are. Even youthful indiscretions carry consequences, and become valuable when we learn the right lessons. We read about the conduct of 200 business school applicants who hacked into systems to find out their admission status. According to Business Week (http://www.businessweek.com/bschools/content/mar2005/bs2005039_7827_bs001.htm), “Harvard decided these potential students are not tomorrow's leaders. In a statement, Harvard Dean Kim B. Clark called the hacking ‘unethical,’ saying Harvard wants to educate principled leaders with ‘a strong moral compass and intuitive sense of what is right and wrong.’ … MIT's Sloan School of Business is rejecting anyone it discovers has attempted to hack into its application files. … some applicants … say they failed to see the ethical issue presented. Some went so far as to say that these individuals should be applauded. ‘Exploiting weaknesses is what good business is all about. Why would they ding you?’” Time will tell what the hackers or their contemporaries learn from this. A quote stood out from the March 23 issue of The Wall Street Journal, (http://online.wsj.com/article/0,,SB111154765127387342,00.html), “It's likely that nothing spells the end of office innocence for a newly minted employee as quickly as bad behavior by the boss. At their worst, such rude awakenings can slap the bushy-tailed idealism right out of an office newbie. At their best, they just get filed on the trash heap of life's lessons.” When workers find a mentor and emulate mature and appropriate behavior, the entire workplace benefits. As has been our annual practice, we pass along selected wisdom from Warren Buffet’s annual report to Berkshire Hathaway shareholders. Here’s a great example of setting tone at the top by taking personal responsibility, “Last year, Berkshire’s book-value gain of 10.5% fell short of the index’s 10.9% return. Our lackluster performance was not due to any stumbles by the CEOs of our operating businesses: As always, they pulled more than their share of the load. My message to them is simple: Run your business as if it were the only asset your family will own over the next hundred years. Almost invariably they do just that and, after taking care of the needs of their business, send excess cash to Omaha for me to deploy. I didn’t do that job very well last year. My hope was to make several multi-billion dollar acquisitions that would add new and significant streams of earnings to the many we already have. But I struck out. Additionally, I found very few attractive securities to buy. Berkshire therefore ended the year with $43 billion of cash equivalents, not a happy position. Charlie and I will work to translate some of this hoard into more interesting assets during 2005, though we can’t promise success.”

 

Are you setting an example to emulate in your workplace? What messages do you convey by your behavior? When a worker behaves dishonestly, what do you do? How do you assimilate new workers into your organization? Can you maintain idealism, and benefit from it, or does it evaporate when the humanity of leaders becomes evident? When you don’t do your job well, are you as clear and direct about it as Buffet?

 


Follow-up

Here are selected updates on stories covered in prior issues of Executive Times:

 

Ř      We paid little attention to Jacques Nasser’s departure from Ford, and last mentioned him in the in the September 2001 issue of Executive Times when we noted that he and the company seemed to be getting the Firestone tire/Explorer fiasco behind it. The March 28 edition of Forbes (http://www.forbes.com/business/forbes/2005/0328/058.html) gives an update on Nasser, noting the money he’s making in turning around Polaroid through his current career at J.P Morgan. For those wondering about great second acts, this may be a good example.

Ř      When we said in the August 2004 issue of Executive Times that Harry Stonecipher was probably not part of the problems at Boeing but seemed to be leading solutions, we were dead wrong. On March 7 (http://www.boeing.com/news/releases/2005/q1/nr_050307a.html), Boeing announced that “its Board of Directors asked for and received the resignation of President and CEO Harry Stonecipher. … The Board actions were taken following an investigation by internal and external legal counsel of the facts and circumstances surrounding a personal relationship between Stonecipher and a female executive of the company who did not report directly to him. The Board determined that his actions were inconsistent with Boeing’s Code of Conduct. ‘The Board concluded that the facts reflected poorly on Harry’s judgment and would impair his ability to lead the company,’ said (Board Chairman) Platt.”

Legacy

Counselor

When I read in his autobiography, The Making of a Public Man, that he stood up to personal bullying from President Lyndon Johnson, I knew at once that I liked and respected Sol Linowitz. According to a 1995 interview (http://www.dcbar.org/for_lawyers/resources/legends_in_the_law/linowitz.cfm)  in Bar Report, he became a lawyer because of advice he received while at Hamilton College, from Elihu Root who said, “’Be a lawyer. A lawyer needs twice as much religion as a minister or a rabbi.’ The point he was making was that if you really believe in your principles you ought to put them to use in the real world and not just preach from pulpit. I thought that was a profound truth.” While at a Rochester, New York law firm, he helped a client and friend, Joe Wilson, prosecute patents for a process called electrophotography. Over a decade, Wilson and Linowitz changed the way the world did business. Linowitz served as chairman of Xerox Corporation from 1960-66, when he finally yielded to the many requests from Lyndon Johnson to come to Washington as ambassador to the Organization of American States. After Johnson’s second term, Linowitz joined Coudert Brothers and practiced international law. He later helped create the Panama Canal Treaty. While at Coudert, he wrote The Betrayed Profession that called for attorneys to abandon huckstering and return to their true calling as “members of a learned society of professionals bound by ethical standards, morals, and manners.” Linowitz died in mid-March at age 91. During his long life, he lived what he preached and provided an ethical model for all to follow. He was also willing to tell many of us, the powerful included, things that we didn’t necessarily want to hear. His wise counsel will be missed.

 

 
Latest Books Read and Reviewed:

 (Note: readers of the web version of Executive Times can click on the book covers to order copies directly from amazon.com.  When you order through these links, Hopkins & Company receives a small payment from amazon.com.  Click on the title to read the review or visit our 2005 bookshelf at http://www.hopkinsandcompany.com/2005books.html).

 

Title (Link to Review)

Author

Rating

Review Summary

Purchase

The Truth About the Drug Companies: How They Deceive Us and What To Do About It

Angell, Marcia

Deceit. Abundant examples of the deceit from big pharma followed by specific suggestions for reform. Keep blood pressure medication close at hand when turning these pages.

Hour Game

Baldacci, David

Copies. Reprised characters bumble along from one copycat murder to another in a plot that drags after a promising start.

Black Wind

Cussler, Clive

Familial. Cussler reprises Dirk Pitt Sr. and Jr., and brings along his own son as co-author. Typical cool heroes, one-dimensional villains, tech toys, and thrilling plot.

The Geographer’s Library

Fasman, Jon

Alchemy. Ambitious debut novel, full of suspense set in the present, and the history of fourteen objects stolen from a 12th century geographer.

Blink: The Power of Thinking Without Thinking

Gladwell, Malcolm

Decisions. Entertaining and thought-provoking exploration of how we make quick judgments that are sometimes spot on, and other times very flawed, thanks to our adaptive unconscious.

Golden Years

Greeley, Andrew M.

Transitions. In the latest O’Malley family saga, Vangie dies and Chucky and all cope with grief and face new crises. Uplifting and full of rampant optimism.

The Broker

Grisham, John

Chase. A D.C. powerbroker, sprung from the federal pen and sent to Italy for an identity change, uses many skills to elude enemies. Better than recent Grisham offerings.

American Purgatorio

Haskell, John

Desire. Thoughtful and serious novel of narrator’s transition from one life to another through a purifying and redemptive journey in search of the missing wife he deeply desires.

Shadow Divers

Kurson, Robert

Compelling. Journalist describes how two wreck divers find an unidentified U-boat in deep water, and push themselves to find out all they can about it.

Leg the Spread

Lynn, Cari

Winning. Life in the pits at the Chicago Mercantile Exchange is all about winning, and for women the path to winning has some added obstacles. Entertaining and interesting look at some fascinating people.

Island Tempest

Mewshaw, Michael

Revenge. Deposed CEO executes revenge against board chair and other colleagues on Eden, a resort island off the Florida coast.  Big assist comes from paraplegic neighbor in the federal witness protection program.

You're in Charge--Now What?

Neff, Thomas J. and James M. Citrin

Structure. Headhunters present 8 point plan for leaders in new roles, based on interviews with executives. Can be distilled to: listen, learn, underpromise, overdeliver.

Melancholy Baby

Parker, Jr., Robert B.

Kin. Sunny Randall’s back and tries to deal with her personal life while helping a client figure out whether or not she’s related to the people she’s known as her parents.

Prep: A Novel

Sittenfeld, Curtis

Class. Scholarship student from Indiana heads East to boarding school. All the adolescent and prep school angst plays out, especially the wealth gap.

DisneyWar

Stewart, James B.

Dishonesty. Disturbing story of dysfunctional company and dishonest CEO who was rewarded highly despite colossal and costly mistakes.

 

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