Archive for the ‘Organizational Culture and Ethics’ Category

It is said that great events can test one’s character. This week’s storm has provided – and will continue to provide – a test of our national ethics. So far we are doing well. Professional ethics at its best has come to the fore in the past few days:

  • The actions of the NYU Langone Medical Center – doctors, nurses, staff and administrators – in reacting to the loss of power was an effort they can always be proud of. Saving the lives of young babies who were dependent upon respirators that no longer functioned; removing their patients down the dark stairwells from many floors up; and maintaining throughout a sense of order and calm was ethical professional behavior at its best.
  • The New York Fire Department, the people who never say “we can’t,” fought a raging fire in Queens at the edge of the incoming ocean in the midst of the storm.
  • The brave helicopter pilots and rescuers from the Coast Guard saved all but two of the crew of the Bounty, plucking them one by one from the massive waves in the Atlantic.

These and untold others are the many heroes we have among us. People who risked their lives to save others.

Now we have another test that will soon be upon us – a test of corporate and political ethics. The one that comes when ordinary citizens file their insurance claims.

We have some good friends who lost their home to Hurricane Katrina years ago. They were lucky enough to be out of town at the time; neighbors who stayed were never seen again. When they were able to return there was nothing left but a handful of personal items and a lot of memories. A total loss.

Many years later they were still fighting the insurance company who had their policy. Read the fine print. Disaster is tricky. Was their home destroyed by flooding? Or was it the wind? Or was it the storm surge? No camera was there to record what happened. No neighbor could serve as an eye witness. You think you have insurance… but you don’t.

Sandy is a huge insurance industry event. Enormous. My bet is that some in the industry will do everything they can to forestall and avoid paying claims. Call me a cynic, but there is a history. We will see. And regardless of who wins on Tuesday, I don’t expect any substantive new legislation that oversees the writing of the fine print to eliminate the question marks and loopholes for future natural disaster victims.

Meantime, kudos go to the airline industry. They have fine print too, but they waived the $150 change fees for people who had to cancel or desired to cancel their travel. The airlines lost money on this one and their financial health is not nearly as strong as the insurers. The airlines lead the way.

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Walmart was in the news this week big time. First an extensive report in Sunday’s New York Times examined the company’s Mexico subsidiary, painting a picture of corruption and bribery related to the approvals required for opening new stores in Mexico. The article presented the case that the top echelon of Walmart initially investigated the matter then decided to turn the case over to the very executive(s) who were being investigated by their internal team. The net result was that nothing was ever released on this story until the Times’ investigation, which took place a few years later.

Faced with the Times’ story, the company announced it was re-opening the examination. Significantly, the key figure in the Mexico saga, Eduardo Castro-Wright, then chief executive of the Mexican subsidiary, was promoted to be in charge of all of the U.S. stores and is now a Vice-Chairman of the corporation, according to the New York Times.

Now two Congressmen have decided to launch an investigation and the Washington Post reported that Walmart participated in “an aggressive and high-priced lobbying campaign to amend”  the Foreign Corrupt Practices Act, the very law that applies to this situation.  The Post also reported that Walmart may have been under investigation by the Department of Justice since late last year.

This will be a significant story in the months ahead. Stock in the company’s Mexican subsidiary was down around 5% on the Monday after the New York Times broke its story.

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In this weekend’s Sunday New York Times, the lead article concerns an investigation of bribery and corruption in Wal-Mart’s Mexican subsidiary. Read that article and then read this one from Sports Illustrated on the Jerry Sandusky scandal*.

The Sandusky Penn State scandal and this expose involving Wal-Mart are just two of many examples of the impact of corporate culture on the ethical behavior of individuals and the organization itself. In both cases, when faced with the fundamental question of “What is the ethical thing to do?” executive management appears to have decided to “protect” the organization rather than report the situation to law enforcement. In Penn State’s case that would have been the local police; in Wal-Mart’s case it is the federal government. I placed the word “protect” in quotes because in so many of these major scandals the truth eventually surfaces and more damage has been done to the organization by that very attempt to protect than if they had turned the issue over to legal authority at the outset. The same is true of the major church who hid its child abuse problem from view for decades only to have it out in the open in the end. So when someone says to you “we must protect the organization” race to the nearest exit. In terms of keeping secrets, we have been in the digital age ever since Ollie North’s attempt to erase his emails failed.


*btw, Sports Illustrated had the best investigative journalism article on that scandal.

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And because it was tax prep week, I am a few days late getting this post together.

Nonetheless, it was a busy week in the business ethics arena:

Wells Fargo was hit with $ 3.1 million in punitive damages by a federal bankruptcy judge over a case involving just one homeowner. The judge called the bank’s handling of the five year long litigation  “highly reprehensible.”

Kodak, who has filed for bankruptcy, has requested the court’s permission to issue bonuses to selected personnel to prevent them from being hired away by others. About $8.5 million of the $13.5 million would go to middle management employees and above. This is reminiscent of Enron, which also paid post-bankruptcy bonuses to upper levels of management even as regular employees saw their retirement funds nearly disappear when the company’s stock plummeted.

In a disappointing piece of news, a subsidiary of Johnson and Johnson was found guilty by an Arkansas jury of deliberately hiding risks associated with a multi-billion dollar drug. I say disappointing because I believe that J&J has a long history of ethical behavior dating back to its handling of the tylenol poisoning event many years ago. This week’s decision was against a subsidiary of the company.

And on tax prep week, here’s this interesting item. According to a report from the nonprofit taxpayer watchdog organization Good Jobs First, a number of states are allowing employers to retain the state income tax they have been withholding from employee paychecks. Sounds like a case of subsidizing the company’s profits with money taken from the employee. While one can understand the rationale if the companies involved were small businesses, the report states that corporate beneficiaries of state largess include such profitable enterprises as General Electric, Goldman Sachs, Procter & Gamble, Toyota and Chrysler among others.

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Since this past week has had a strong spiritual element in the form of Easter and Passover, this is a good time to bring the Wegmans story to your attention. Wegmans is a privately owned and growing chain of grocery stores in the northeast. Headquartered in Rochester, N.Y., Wegmans is family owned, provides exceptional training and benefits for all of its employees, who are “our number one asset, period.” This article in The Atlantic is well worth reading and highlights the impact a positive, ethical corporate culture can have on an organization, its customers, people and shareholders.

And speaking of corporate culture, The Wall Street Journal recently featured a story comparing and contrasting the management styles of Steve Jobs and Bill Gates. The two individuals had very different management styles and approaches to satisfying consumers and the article explores how CEO management style has impact on bottom line results as well as employee contributions.

And a final note on justice satisfied, Dennis Kozlowski, former Tyco CEO, was denied parole this week.

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It’s actually only Wednesday, but we already have two major news stories related to business ethics.

In the on-going investigation into Rupert Murdoch’s News of the World’s alleged hacking of personal cell phones to obtain news stories, Rebekah Brooks, her husband and four other individuals were arrested early Tuesday morning. Brooks, a key person in Murdoch’s London operations, was an editor at News of the World and has been previously arrested in the same investigation.

This morning Greg Smith of Goldman Sachs had an op-ed published in the New York Times in which he announces the reasons behind his departure from the global investment banking firm. Mr. Smith’s piece focuses on the culture at Goldman, how that culture has changed and its implications for the firm. His hard-hitting article is well worth reading as an example of the impact organizational culture can have on ethical behavior.

Our prediction is that Mr. Smith will be written off by Goldman as ‘not a team player,’ ‘was already going out the door,’ ‘doesn’t represent what is really the character of our organization,’ and more.  In other words, we could probably write their press release for them.

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