Dear Dr. EthixBiz:

As a professional in the finance industry, I am constantly presented with scenarios which could be considered ethical dilemmas. Because our industry is strictly regulated, our firm puts a strong emphasis on business ethics, and I have a strong personal commitment to industry ethical and regulatory standards, I have never been tempted to profit off of a scenario that I would have considered unethical.

Nevertheless, I have witnessed actions by others that would be considered extremely unethical. On an almost daily basis, I witness questionable trading by other firms which are probably in clear violation of ethical and regulatory standards. Firms and brokers constantly misrepresent and miss-price financial transactions in order to facilitate trade executions and garner commissions. More often than not, in the derivatives marketplace, these financial transactions are far too complex for regulators to track and comprehend. Therefore, this continuous unethical behavior goes unnoticed and unpunished.

Most of the parties involved in these transactions are too short-sighted to realize that in the long term these actions will ultimately cost them far more in legal fees and lost business than the profits they receive in the short term. But is waiting for the long term repercussions all we can do?

-RW

Dear RW:

Good to hear that you personally are standing strong and that your firm emphasizes full compliance and sound ethics. Keep it up! Give us something to cheer about.

Obviously, if you have hard evidence of illegal activity at a competitor firm (or your own) you are morally (and probably legally) obligated to blow the whistle rather than cover it up. Talk with the leadership at your own firm about what steps to take.

It is troubling that there are “financial transactions . . . far too complex for regulators to track and comprehend.” If what we need is more and better-trained regulators and watchdogs then we as a society and business community had better find, fund, and train them to prevent harm to investors. If what we need is better transparency and accountability in these markets, we’d better improve the technology, processes, and reporting requirements so that becomes reality.

But if a significant part of the problem remains scale and complexity, my argument would be that limits and protocols need to be set that prohibit unmanageable products. Think about automobile safety: we do not allow production, sale, and licensing of vehicles that cannot be road tested and proven to be controllable, drivable, and safe. Why should we allow the creation and sale of any financial “vehicles” and processes that prove to be uncontrollable and dangerous.

As the old adage goes, “Govern yourself, or be governed.” If banks and investment houses do not themselves take the initiative to operate in a constructive, ethical way and set high standards for their industry, you can bet it is only a matter of time before some draconian, ham-fisted regulatory crack down will come out of our legislatures. The people are left with no other choice.

-Dr. EthixBiz

Dear Dr. EthixBiz:

A contractor in my department was not extended a full-time employment offer at my company after his contract ended. He was very disappointed, but accepted the decision. Two days before he left, he gave me a pricey gift certificate to one of the best restaurants in San Francisco (Boulevards). After I received it, not realizing what it was until I went back to my desk and opened the envelope, I knew I couldn’t accept it because (1) it was extravagant and probably violated my company’s gift policy and (2) I didn’t want him to spend so much money on me without having another income stream coming for him and his family. He refused to accept the gift certificate back so we compromised by going to lunch together with another colleague at Boulevards on his last day. We all enjoyed the lunch, each other’s company, and I was immensely relieved. Even if my company would have been ok with the $ amount, I would still feel bad – especially since I heard that he had never eaten there before! Do you think I did the right thing?

-Susun

Dear Susun

Just to be clear, in the end the lunch was not just a gift to you personally from him but a shared experience – and a shared bill? — for (now) three of you at the restaurant? That seems like a great resolution to me. In situations like this it is essential to follow company policy on gifts and disclose/report these events to your boss or HR or the compliance office, as appropriate. The deeper ethical concerns have to do with a possible conflict of interest. Could the gift unduly influence you or compromise your judgment on a decision to re-hire this contractor? Avoiding that possibility – or even the appearance of such a possibility – is the wise thing to do. Going out “dutch treat” is a great solution: you end the episode on a warm and positive note without the financial and influence questions.

One other comment: you have no clear obligation to worry about his personal and family finances but the fact that you do see (and care about) your colleagues as whole people with lives beyond the workplace is a very admirable thing. Most great leaders and effective managers share the kind of people-valuing sensitivity you displayed. Bravo Susun.

-Dr. EthxBiz

Dear Dr. EthixBiz:

Will is the financial vice-president of a community hospital. He is under heavy pressure from the president and board of directors to reduce the operating deficit. His job may be on the line if he fails.

The hospital has a long-standing policy of providing basic care to all in need. A huge list of uncollected and perhaps uncollectible bills for such services is part of the financial problem. But no one wants to abandon this Good Samaritan policy.

Will could balance the books by giving the contract for disposal of medical wastes to Big Pig Waste Management. But Big Pig is widely suspected of dumping medical wastes in unsafe ways and illegal places. What are the ethical values and principles at stake here? What is the best way to work toward an optimum ethical outcome? What should I advise Will to do?

-Frank

Dear Frank:

We have a real conflict of values here it appears: medical care for poor vs. protection of environment and people who live in it. There is no real way to resolve that conflict per se—except if a specific patient or population was actually dying on the spot (then we say, “the heck with the garbage, save these lives”). But it is not quite that extreme (yet). There may really be a problem with the law, professional ethics, company ethics—the whole six-fold test. My main suggestion is to be very creative and think win-win. Share the problem more broadly. Leverage Big Pig into better practices and transparency. Appeal to their higher, better self. Embarrass them publicly if it takes that to get them in line. Or work with the Urban Job Development Association to create a new Business (“Good Samaritan Eco-friendly Trash Co.”?). Go public in the community. Have discussions, newspaper articles about the two concerns (health care for poor, environmental responsibility). You can really do something great here.

-Dr. EthixBiz

Dear Dr. EthixBiz:

I recently graduated from college and accepted a great job as a scientist at a leading high tech research and development company. I will be involved in exciting research right in my interest area. The job pays very well—my old classmates are a little envious of my great opportunity—but I am mainly grateful for the salary so I can make life a little better for my ailing, aged parents. I was given a security clearance and am deeply involved in a research project which is expected to save thousands of lives around the world if it is successful. The stakes are high and I am excited to be involved.

My boss has emphasized over and over how important this project is and how critical it is to maintain loyalty, integrity and mutual trust on the research team. But while walking past a van parked on the street just outside the company parking lot one morning, I unintentionally discovered that Joe, the key genius on the research team, is sexually involved with the boss’s wife. I wondered what to do about it but decided to hold off at least for the time being (but was I right to do so?).

But then things got much more complicated recently when philandering Joe told me (and I later confirmed from my own observation) that our boss has a serious cocaine habit (using even in his office sometimes) and that he appears to be spending government grant money on his drug habit.

I am in a horrible bind and don’t know what to do.

-Jane

Dear Jane:

Oh my goodness, this is ugly. What a disappointment after such high initial hopes. You are the “new kid on the block” and we can presume that all the other members of your team are not sleazy and corrupt. I would not urge you to jump into the leadership of a reform or whistle-blowing project quite yet. The sexual thing (are you absolutely sure Jane?) is offensive and unethical to many people but we really don’t even know if it might be going on with the boss’s knowledge and permission (he prefers coke to sex?). The law usually doesn’t prohibit sex between consenting adults but it does prohibit embezzlement and mind-altering drug use on the job, especially in government settings. So the problem goes from possibly minor to definitely major with the coke and bucks phase.

My suggestion: move slowly but don’t give up on it yet. Try to confide in a trusted colleague on the team and ask if they are aware of any weird stuff going on (I would not make any rash accusations on any of these issues). If you get a lot of self-protecting denial and find yourself alone with this after making some slow, wise, deliberate steps to share the problem with colleagues, I would advise you to quit (sorry Jane but if you sit on this and do nothing, you are implicated). Send an anonymous (or signed, I’m not sure how endangered you might be) letter to some higher-ups and to one or two muck-raking journalists at 60 Minutes, Frontline, etc.. Look for another job?

-Dr. EthixBiz

Dear Dr. EthixBiz
I recently did a post for Care2 called “Should We Blame The Gates Foundation for The BP Disaster?” It’s already generating a lot of heat.  It’s really about corporate accountability. The Gates Foundation owns 7 MM shares of BP stock. Does that make them partly responsible for BP’s performance and impact? 
Dave Rochlin
Founding Partner, CEO, ClimatePathS

Dear Dave:
You bring up a very important question. Generally speaking we would say that people can’t be held morally responsible for what they don’t know or what they are powerless to affect. So to the extent that shareholders are kept ignorant and powerless by the companies they invest in, we can give them some slack, if not quite a complete pass.
But we must go a step further and say that we must take some responsibility and exercise some initiative to find out how our investment funds are being used, and what kinds of activities they are supporting. In other words we are responsible for what we could know but have not taken the trouble to find out. It is not possible to wash our hands and claim innocence if we sell weapons to criminals and the insane — and it is not possible to hand over our investment capital to be used by companies that rob and exploit people or trash the environment — and then claim innocence. If we participate in the upside profits, we should also participate in the downside losses and liabilities.
So I’m not sure we should hold the Gates Foundation responsible for BP’s missteps up to now — maybe it is enough that their investment is shrunken or lost. But all investors definitely should be held responsible from this day forward: now that they know more about BP’s operations, the investors should rise up in revolt and force the needed management changes. And no severance pay for those who led BP into this debacle.
-Dr. EthixBiz

Dear Dr. EthixBiz:

I am an executive chef who was recently preparing to open a new restaurant in the San Francisco Bay Area.  As part of the process I had to interview potential produce suppliers.  After meeting several company sales representatives, the actual owner of one produce company came to meet with me.  The owner offered competitive prices and excellent service and in my mind I was leaning toward a deal.   The owner became very frustrated, however, when I would not sign a contract on the spot.  I explained that I had two more companies to interview and I didn’t feel it was fair to them, or to the restaurant owner I worked for, until I had seen all our options.
           
Leaning toward me, the eager produce company owner whispered that “perhaps a percent of your order could be returned to you personally.”  He then assured me that this is a common practice, financially justifiable because he, rather than a sales representative, would be managing my account.  My heart raced as I thought of the extra income I could receive just by doing business with a company that I would almost certainly have chosen anyway.  Furthermore, gas prices were rising and all kinds of other reasons came into my mind to justify the kickbacks I would receive. 

In the end I felt a bit of shame for having even considering it and I called the owner of my restaurant to tell him what had happened.  He was not surprised and I was relieved by being honest.  I chose a different produce supplier as I did not want to have to deal with a firm that seemed ethically suspect.   Did I make the right decision?  Or was I overly-cautious?

-Chef John   

Dear Chef John:

There probably are legitimate business situations in which a seller could sweeten a deal by eliminating middle man costs (e.g., avoiding lawyers or agent commissions)—or where a sales agent might give up part of his or her commission to make a deal.  It is even thinkable that a boss or owner might approve your getting that “kickback” if it means a better deal for the business (and not just for you personally).  And it might make sense sometimes to strike a great deal before proceeding with any further interviews that were scheduled.  By themselves, these aspects of the case are not decisive.

The critical ethical factors here (in addition to the quality and safety of the product and service, of course) are loyalty, honesty, and transparency.  You are working for the restaurant owner and your loyalty must be to him/her and to the success of the enterprise—not to your personal interests by themselves.  The whispering is symptomatic of a shady deal.  If it is ok, why the need to whisper? Do it out in the open in front of your boss, other competitors, et al.  Someone else may come along with an even better offer once they see what is on the table. Openness, honesty, and transparency are the way to go.

So my view is that you did precisely the right thing and not only do you feel better, your personal stock has risen in the eyes of your employer and you have begun creating an ethically healthy, admirable culture that bodes well for customers, employees and all other stakeholders.

-Dr. EthixBiz

Dear Dr. EthixBiz:

A colleague spent more than ten years in ethically compromised organizations working under leaders who cheated on their taxes and had business officers cover it up, lied to employees about budgets and benefits costs, conducted extramarital affairs in the workplace, and committed general employment policy violations . . . . the stories are worthy of TV. This person believed it was her job to find creative ways to spin these compromises to staff and the result seems to have been a dulling of her ethical conscience. How might you advise her to sharpen her ethical conscience and now speak diplomatically and confidently about what’s true in the workplace?

–Susan P.

Dear Susan:

Your colleague was in a tough position—not quite doing the bad stuff itself but asked to cover it up. Letting it go on for ten years is indeed a recipe for a dull, inattentive conscience.

But it could also be a recipe for some jail time and a real career buster. If we know about illegal activity (tax cheating, lying to employees, violating policies) and don’t report it, we are legally liable for participating in the cover-up. We are accessories to the crime. We don’t even have to be active in the deception as your friend was; just being silent about crimes is enough to court serious trouble. Fear can be a great motivator for change. Your colleague—and her bosses—need to be fed the daily stories of companies and careers destroyed when people get caught.

Love, however, is an even better motivator than fear. What I mean is that business people need to be challenged and inspired to aim higher. They need examples of successful companies and leaders with great character and ethics. Feed your colleagues and bosses a constant stream of stories of ethical excellence in business. I just read this morning about Southwest Airlines’s financial performance, on-time record, and customer and employee satisfaction for last year: top of the airline charts for something like the 35th year in a row. People need to know that you don’t need to operate like (for example) CEO Glen Tilton and United Airlines; you could go the route of Herb Kelleher, Gary Kelly, Colleen Barrett and Southwest Airlines.

So as a friend I would challenge and encourage my cover-up colleague to be all she can be, to aim higher and do the right thing, to build relationships with colleagues of character, to be the kind of person her kids can be proud of some day, to caution and pressure her bosses to clean up their own act, avoid disaster and achieve their own potential and greatness. She needs some support to make and sustain such changes—maybe you and a couple other colleagues meet once a week as a coffee (and support) group. If things get too bad she must blow the whistle and (probably) find a new job. Her support group can help her know when that point is reached.

-Dr. EthixBiz

Dear Dr. EthixBiz:

While completing the financial statements of a client, to be used by the Partner of my firm to prepare that client’s tax return, I noticed that one of the staff nurses received an unusual mid-year bonus that was roughly 100% of her regular pay.  The firm I worked for also cut payroll checks for the client, so I asked my peers about it because I was new to the firm and the client. It turned out that the nurse had requested a bonus from the doctor in exchange for not telling his wife that they were more than co-workers.  The client wanted to deduct the “expense” so my firm grossed up the check for payroll taxes, cut a check to the nurse for an even amount, and the doctor paid the employer portion of the payroll taxes.  The partner of the firm explained to me that it was “ok” because employee and employer payroll taxes were paid, the company was not publically held, and the client can pay his employees any amount he wants.   

-Lisa

Dear Lisa

The first issue is whether paying off the nurse is (1) a legitimately deductible business expense or (2) an employee bonus for her performance (overtime services rendered?) or (3) a personal expenditure by the client rather than a business-related expense. Seems pretty clearly the last option. You have acted ethically and responsibly by raising the issue. Your boss has decided to help the client use his company books to cover up this personal transaction. Are there other partners in your firm who approved this activity or is your boss endangering his own partners by his choices here? If the leaders and owners of the client’s firm and of your firm are ok with this approach, if your role is clearly defined as limited to completing financial statements and not participating further in the questionable use made of those statements, you may be ok to let it pass for now. But I would check with some respected, veteran accounting professionals to make sure you are in the clear legally and ethically.

The larger question is about your firm and its leadership. Are they willing to prostitute themselves for the sake of acquiring or retaining business? Are they committed to high standards of ethics, honesty, and integrity? Do you want to devote your energy and career to working for people like this? You might decide to look for alternative employment.

-Dr. EthixBiz

Dear Dr. EthixBiz

While I totally agree with your second paragraph response about the bigger issue of whether Lisa and her firm would want to work with this client any longer, I disagree with your assertion that it [a large payment to an employee with whom the principal had a sexual affair] is not a valid business deduction.   Assuming this is a sole shareholder/officer corporation, I would assume that the owner has total discretion about how much to bonus his employees and which ones get bonuses, etc.  To this end, giving one employee a big bonus, for whatever reason, is fine – all the taxes are paid and the employee has a W-2 with that extra income.    

The rest of your comments I agree are spot on – with one additional one being if that corporation had multiple officers and/or shareholders, then I as the CPA have a responsibility to make sure those officers/shareholders are aware of what this doctor is doing and the potential problems that could unfold.

Peter M. de Laveaga, CPA
Lafayette, California

Dear Peter

Thanks for the clarification. I actually didn’t flatly “assert” that the sex bonus was not deductible; I only urged her to check with an expert — like you. Thanks!

Dr. E.

Dear Dr. EthixBiz:

What are your thoughts on the “Bailout” proposal for the “Big 3” automakers?

Mike R.

Dear Mike

I’m glad you asked for “my thoughts” rather than “THE ANSWER” — which I don’t think exists. I don’t think Ford, GM, Chrysler or any other company stands forever. Organizations come and go and these three may have served their time and now need to go. I loved my ’56 Chevy but that was the last Detroit product that did the job for me. I would love to support American auto workers (some of my Toyotas have actually been manufactured in the USA) but every time I have to drive an American car as a rental I am reinforced in my preference for Toyota design, quality, and price, to say nothing of the 45 mpg I now get in my Prius.

What matters to me are the employees of the “Big Three” and of their distribution and supply chains. My preference is to reinforce the “safety net” under all of our citizens (not just auto industry workers), i.e., unemployment benefits, retraining/education funding, medicare for everyone (or something comparable), social security for retirement, maybe experiment with Milton Friedman’s “negative income tax” idea for helping the poor — in other words the minimum assistance necessary to carry on while looking for the next job.

These are extremely complicated and challenging issues, no doubt, but my preference is that we as a society (the wealthiest society in human history) choose to maintain a livable floor under our poorest fellow citizens and beyond that give them freedom and opportunity to make what they will of their lives. Raise my taxes another 1% if need be. I don’t want anybody forced to live in a cardboard box under the freeway overpass. Bail out the poor and struggling directly; no bailouts for the rich and powerful (I am not at all against the rich. I am against helping the powerful and ignoring the weak. I am against lavishing money on the rich and relying on them to give the crumbs from their table to the poor).

Giving billions to mega-companies that have been mismanaged into a corner with no exit by overpaid, ethically-challenged, strategically-incompetent, whining supplicants jetting to Congress to try to loot a public treasury already drowning in red ink from the past eight years and more . . . this is a very bad idea (and a long sentence – but it must be said). This is just buying a few months delay of the inevitable. It is little different than buying dope for an addict. At the very least, if the billions are given/loaned, it should be on condition that the boards of directors and the upper executive leadership (not just the CEOs) are dismissed and replaced. An extreme bailout warrants extreme measures and conditions. There are thousands of brilliant, ethical, competent business leaders in America. Those running the Big Three are not in that talent pool.

But let’s think more broadly about what is going on. Our society is facing several very serious challenges. (1) depending on foreign oil turns out (often) to help fund weapons for regimes that terrorize their own people as well as other nations; (2) the more oil we use the greater the negative impacts on the planet and on people’s health; (3) the high cost of gasoline has negative impacts on personal and business budgets; (4) the offshoring of manufacturing and other jobs often has benefits for prices and profits but usually comes at a significant cost to the domestic workforce.

All of that is by way of background for the argument that if the government really wants to help the auto industry in the USA, it would be better to stimulate it in a way that could address those challenges just listed. How? Not by giving money to the leaders of our pathetic Big Three. Rather, fund a vehicle purchase program (how about four years? i.e., enough time for a highly motivated big industry to significantly retool but not as a permanent entitlement program) that provides something close to zero interest vehicle loans of up to (say) $15k (no point in going higher—luxury car owners don’t need this help) for purchase of vehicles (a) rated at a minimum 35 mpg (or shall we be bold and say 40 mpg?) for combined city/highway driving and (b) at least 80% of whose parts and assembly labor costs are verifiably being paid to American workers. Loan these funds at (say) 1% interest to banks that have not gotten in trouble or been bailed out; allow them to make auto loans to individual consumers at up to 3% interest within the conditions described above. What happens? Honest banks get some business; foreign oil merchants find demand and income radically reduced if not eliminated; the environment thanks us for emitting less toxins; customers cut their fuel costs in half; innovation is stimulated to create products for this reinforced market demand; and American jobs grow, whether the ownership of the company is American or not.

-Dr. EthxBiz

Dear Dr. EthixBiz:

I produce a pet toy (getpawpets.comin China at a fair trade certified factory with no child labor etc. I use an agent/middle man who has been working with the same factory for over 12 years now and I pay almost $3.00 extra per unit to make sure that the toys are made under safe circumstances, using safe practices, and are of high quality. Consumers, however, often do not differentiate between different products made in China, but quite simply assume that if it was made in China it is bad or dangerous. Because of this misconception I decided to put the agent/middle man’s company name on the tag as the manufacturer rather than list the Chinese factory and say “made in China.” The tags meet all legal requirements in all 50 states and contain no falsehoods. The factory’s certification number and “CN” (which stands for China) is on the tag but it does not explicitly say “made in China.” This was a dilemma for me but I thought long and hard about it and decided not to brand my product with the negative “made in China” association because I have taken all of the necessary steps to insure that the fears and problems associated with Chinese products do not apply to my product and so I should not have to suffer the consequences of products made in China that do have safely and ethics issues. Do you think I made the right choices here?

-Ian W

Dear Ian-

Actually I think you did just the right thing here. You are certainly respecting the intent of labeling laws in that you are protecting your customers from harm. And you are not violating the form of the law in any of the fifty states. It would be wrong if you formally complied with a law or regulation but evaded the purpose of that law. You have provided labeling information with the middle man’s identity and the factory number and country code — plenty for anyone who wants to investigate further. Finally, I assume that any of your customers could question you further and you could then give them the full story and both acknowledge the China factory origins and assure them of the product’s safety. I don’t see any reason why you should, in this case, invite unwarranted negative speculation about your product.

-Dr. EthixBiz

Dear Dr. EthixBiz: 

What did you think of the Wall Street Journal article “Does Being Ethical Pay?” by Remi Trudel and June Cotte (WSJ, May 12, 2008)? Did they succeed in answering the question?

-Ross P. . . . and twenty-plus others

Dear Ross and other friends:

The article you mention has been widely reprinted and circulated and raises some interesting questions. The two Canadian researchers tried out two experiments with 97 and 84 coffee purchasers, respectively, and a third experiment with 218 potential tee shirt purchasers. They gave different information to various segments of the research group. To one group they gave positive information about ethical production of the product (organic, fair trade labor standards, etc.), to another neutral information, to a third group negative information (bad labor practices, etc.). Then they asked the prospective buyers to say what price they were willing to pay. In general the buyers offered higher prices for ethically produced goods; they low-balled prices for unethically-produced goods. I am oversimplifying the three experiments just a bit but this was the general finding: to a limited extent, customers will pay a premium for goods they understand to be ethically-produced. They expect to pay lower prices for unethically-produced goods. The authors conclude that “companies should . . . make a particular effort to reach out to buyers with high ethical standards, because those are the customers who can deliver the biggest potential profits on ethically produced goods.”

Dr. EthixBiz believes that the study is interesting and is modest evidence that at least some customers (tee-shirt wearing, coffee-drinking Canadians asked to make quick buying decisions posed by researchers) will pay more for fair trade, organic products. Of course, a cynical response would be that what is demonstrated is only that theappearance of fair trade and organic labels allows higher selling prices. More importantly (assuming companies can’t get away with appearances only), the study doesn’t mention the higher cost of producing fair trade, organic products. Higher selling prices are balanced by higher production costs—so it is unlikely that profit margins are actually higher.

Ethics does pay—in the common sense that treating customers with respect, fulfilling promises, and delivering quality at fair prices are ethical practices likely to result in repeat customers . . . and treating employees with respect, paying fair wages, and providing a healthy work environment are likely to increase retention and productivity. Similar arguments can be made easily for ethical treatment of investors, business partners, and other stakeholders. But financial success in business also requires great products, market timing, favorable competitive conditions and other factors—not just high ethical standards.

The companion question we need to raise is “Will we carry out our business ethically—even if it doesn’t pay in the short term?” For the sake of our people and planet we need to hope that most of us will continue to answer “Yes” to that question.

-Dr. EthixBiz

Dear Dr. EthixBiz

You are an engineer, widely-respected in the whole industry for your expertise on tunnel design and safety. Six months ago you accepted a lucrative job offer to move from headquarters in Chicago to a booming branch office in San Francisco and serve as lead engineer on a new tunnel being built in a controversial, earthquake-prone area.

Now six months after moving your family and deep into the project you have reached an impasse. You believe that the California engineering standards have not caught up with the latest discoveries on tunnel earthquake safety. Your San Francisco boss, who recruited you from headquarters for this move, has rejected all of your arguments and insists that, for project budget reasons, the tunnel must be built in conformity with existing regulations, not at the more expensive, newer engineering level you believe that will better provide earthquake safety.

You have concluded that you may be fired if you push too hard. The job market is tight in your specialty area. The kids are just now getting comfortable in their new schools. What are the central ethical values and principles at stake here? How will you sort through the facts, values, and options and find the best, most ethical response?

-RF

Dear RF:

Do we have an ethical problem here? I think so. Maybe everything complies with the law but some engineers tell me it is unethical for an engineer to surrender professional judgment on a critical safety issue. If this conflict were a front page story I think it would create a huge controversy. So where do we go? How do we resolve the problem? Seems like the Chicago headquarters boss should get involved—if for no other reason than to help move you back there again (the Southern California boss should help you move back also; you seem to have been brought out under slightly false pretenses. Your approval was wanted but not your expertise).

But it is also possible that you can broaden the conversation. Get more engineering (and finance) experts involved. Get the taxpaying community involved and find out their sense of priorities (e.g., extra safety margin at higher tax cost?). There is some fact-finding necessary here. This is a huge thing—earthquakes, tunnels, public safety—and it has to be understood that public safety trumps project schedules and budgets. It is not just a power struggle of me against you. Get more people involved! The public almost certainly needs to be made aware of what is happening. When people are significantly affected by a decision, justice requires that they be given some say in their own fate.

-Dr. EthixBiz

Dear Dr. EthixBiz:

We are going through tough times in our industry right now and are having to make tough decisions regarding overhead and staffing.  How do you decide who to let go when your company is full of dedicated, hardworking individuals?  Where do our ethics and values fit into this process? I can’t help but wonder about the lives and the families behind the scenes.  

-Elyse B

Dear Elyse:

It is very encouraging to see business managers like you who actually care about their employees as people with lives and families. I hope you never lose your moral compass on that.

Downsizing and layoffs are part of a big, complex subject, of course. I will resist the temptation to review the often avoidable ways companies get mismanaged into downsizing crises.
Nevertheless, there are business downturns and market changes that cannot really be blamed on anyone or anything in particular. The company has cut everything to the bone and now as a last resort must cut payroll. Maybe everyone can take a 20% pay cut and work a four-day week during the downturn (Hewlett-Packard and Lincoln Electric Motors have done this kind of thing in the past). Maybe the company can downsize enough by offering people early retirement. Maybe the problem can be alleviated by some employees leaving voluntarily for school or other career options they have been considering. Maybe if employees are brought into the process and challenged to think of ways to cut costs or resolve the overstaffing issue—they will come up with some unanticipated creative solution. Maybe.

But in cases where somebody’s got to go despite all our efforts, how do we decide who gets laid off? In my view, a company has to keep people based on which team members are most likely to help the company through the hard time and get it back into a sustainable position. It is about performance today and potential tomorrow. After all, if the company fails, nobody wins. These are hard, painful decisions but there are no real alternatives. Even though it painful, this kind of layoff is not irresponsible or avoidable hurt. Just the opposite, it is a responsible and unavoidable management choice.

Layoff ethics also have to do with promises and transparency: did the company or manager promise the employee a level of job security they are now abandoning? Did the company talk the employee out of taking a job at another company recently, all the while knowing layoffs were possible? Has the employee been made aware not just of the upside potential but also the risks of their job? Losing your job is painful enough. If it comes with broken promises and betrayal, our ethics antennae start to vibrate. It is very important to have clear, well-known policies and values in your organization—and then live by them. If employees know from day one they are signing on to a high-risk enterprise, the lay-off is easier to accept.

Another critical factor is respect. Are employees informed by impersonal letters or e-mailed “pink slips”? Are their office doors re-keyed and locked behind them as they are accompanied out of the building by security? A farewell party isn’t always going to be appropriate but face-to-face meetings with honesty, warmth, gratitude, and concern often go a long way toward preserving someone’s dignity and showing them respect. How about following up on laid off workers with a phone call to see how they are doing?

Respect is great but a little cash helps also! It is ethically praiseworthy to help laid off employees very concretely with things like severance pay, continued benefits coverage for a period of time, job searches, applications, references, and re-training.

There is so much more that could be said on this topic, so many nuances and special circumstances to consider. Companies and managers should discuss these matters well in advance of having to actually deal with them. The laid off individual employees matter, the shareholders matter, the customers matter. If layoffs are mishandled the business may be directly and immediately harmed (e.g., keeping the wrong employees, souring current employees, getting sued by ex-employees for discrimination). Less immediately, the company’s reputation may take a big hit, drive away future job applicants and customers, and create negativity around the company reputation in the community.

-Dr. EthixBiz

Dear Dr. EthixBiz:

I am an employee at Sun Microsystems and while I enjoy a lot of things about my job and company I was pretty ticked off to read that our Board Chairman’s compensation rose from $4.2 million in 2005 to $16.5 million in 2006. Our CEO’s compensation rose from $3 million in 2005 to $22.8 million in 2006. I know that some huge compensation packages are justified (but are they really justified?) by increases in stock price or company profits.

But over the past five years Sun has experienced annual layoffs, declining revenue, and a stock price decline of 93%. So where is the justification of the huge executive pay-outs? Is this an ethics issue or just a “market” reality? If it is ethically problematic, who should take responsibility? What should be done?

-“Pat” (not my real name)

Dear “Pat”:

What you describe is a brief sketch of the executive compensation ethics debates that swirl around us. These kinds of compensation don’t seem to be illegal or violate company or professional codes of ethics. But these practices do trouble many consciences and personal values (it seems to many people to be grossly unfair and out of scale to pay anyone like this—especially when revenue and stock price are plummeting). Whenever publicized, these practices do create an uproar—which is usually an ethics red flag. And investors, if not also employees and customers, may be harmed by the diversion of so much money to two leaders in this manner ands under these circumstances. Ethics is about protecting people from harm.

It is easy for those outside the executive suite to call this legalized “theft”—but easy for the recipients to call it “market value” for talented executives like yours at Sun. The range of effective responses to these practices (should one decide they are unethical) seems very limited (protest, write letters, foment unrest, appeal to congress, quit working for company. Boycott company products, etc.).

The problem here is twofold: (1) are these compensation practices unethical? The answer to this question is very complex but it does seem wrong on the face of it if the rich get richer by oppressing, exploiting, and squeezing the poor. So in your case I would want to know if line employees were having pension commitments broken, benefits reduced, etc., in order to fund executive excess. On the other hand if everybody is at least marginally better off, then it doesn’t grate on our sense of justice so much that our leaders are doing especially well.

(2) What can we do about the problem? In my opinion a great deal more research and discussion is needed to come to some agreement on the ethics of compensation (not just for executives but at all levels—including questions about retirement, health care, etc.). And a great deal of work remains to be done to figure out how best to respond to the problem (whether to constrain unethical practices—or to better explain the justice of practices in the interest of peace). For the moment, I’m just going to agitate and press for that bigger research and discussion and I suggest the same for you and your upset colleagues.

-Dr. EthixBiz

Dear Dr. EthixBiz:
I am troubled when, let’s say, “Company A” in-sources jobs to a third-party overseas-based “Company B” in a so-called “turn-key” arrangement.  What happens is that American Company A provides on-site work space and limited sponsorship of Company B contract workers from overseas—but not other basic necessities such as medical and dental care. These overseas-based workers (and their dependents) must then pay out-of-pocket for US medical visits because their home country health care providers refuse to reimburse them for medical expenses incurred in the US. Two questions: is it fair to these overseas based workers for Company A to save labor costs by forcing them to pay out of pocket their own basic health and dental expenses? And in the case of catastrophic illness or injury is it fair for Company A to foist these emergency costs on to US taxpayers (or hospital emergency room budgets) just so they can save money? Is this smart business strategy or unethical business practice?
-Mark C.

Dear Mark:

This is a classic example of what we call “externalizing” business costs. Instead of the business bearing the full costs of its workforce—and making investors shoulder it on the books, or passing it on to customers as part of the price of the product—others bear the cost. Another example: when a business doesn’t factor in the cost of clean-up or recycling related to its products, it is externalizing these costs on to others, whether they know (or approve) or not. What we want is full cost accounting, not sneaking costs on to others.

Having said that, if the Company B workers come to the US fully informed about these matters and willing to take the risk of having to pay out of pocket, it is hard to hold Company A completely at fault. The more serious issue is when costs are deliberately foisted on to the hospital or to the broader community without their agreement.

The more fundamental problem is the lack of safety-net, basic health care in our society—combined with skyrocketing health care costs. Company A is almost forced by marketplace competition to play this Company B game. Let’s hope Company A is lobbying for national health care reform to even the playing field and make sure that everyone living and working here can get basic care.

-Dr. EthixBiz

Dear Dr. EthixBiz:

I was working as an assistant manager/lead designer under a senior project manager on a design project.  The design was at 90% completion and the budget became depleted.  Furthermore, the client sent over a “punch list” of comments that needed to be incorporated into the final design.  The senior project manager, who had joined the firm this past year, instructed the team to finish out the project and charge our time to another concurrent project under a different client.  I reluctantly complied and felt uncomfortable doing so.

I confided in my mentor regarding my billing dilemma.  After he consulted the Department Manager the original charges were billed back to the company’s overhead and the senior project manager was cautioned that his actions were misaligned with company policy.  Consequently, and unfortunately, my relationship with our senior project manager spiraled downward.

-Phil

Dear Phil:

The only way your senior project manager would have been right to charge one client for work done for another client would be that this is common practice to which all parties agree. But nobody would agree to such a practice! It is unfair. Can’t your senior project manager understand this? Would a little Golden Rule exercise help (How would you like to be treated in these circumstances?”)? How about the transparency test? (Would this cause a scandal or controversy if it was publicized?). It is obvious. If the senior project manager doesn’t get this, he or she is ethically hopeless.

For you: You did the right thing. Covering up this kind of falsehood means you are liable if it comes to light. Maybe your relationship will improve if your manager can be helped to see that you actually were saving him/her from a possible career disaster. Try to explain that and bring in some examples of where this kind of financial shenanigan has led to lawsuits, firings, etc..

For your company and its leadership: it is time for some culture building and ethics and values communication and training.

-Dr. EthixBiz

Dear Dr. EthixBiz:

MySpace and Facebook profiles and comments have sometimes led to employee dismissals. If an employee is writing about his own life experiences on a computer not owned by the company and records his thoughts outside of working hours and off company premises, should the company have the right to discipline or fire the employee simply because they don’t approve of these postings? A veteran Delta airlines flight attendant began a blog in 2003, always referring to her employer as “Anonymous Airlines.” When she posted pictures of herself in her Delta uniform she was quickly fired. She has sued the airline (pending) and written a book about her experiences. She is not the first blogger to be fired from a job after commenting on an employer.

-Sean O

Dear Sean:

Without knowing more details about the Delta employee’s case (did Delta have any stated policies regarding off-the-job behavior or on-line blogging? What exactly was she saying in her blog comments? How was she posed in those photos? Etc.) I can’t really form a very helpful opinion on that case.

We are in a sort of brave new world of internet-enabled info distribution and transparency. Our opinions and postings can go anywhere and everywhere whether we like it or not. Companies need to formulate policy guidelines and be clear to employees about what they expect and what the implications of these policies are. Individual employees need to be smart and never post anything in one of these quasi-public forums they wish to remain private. Write up your Facebook profile as though your boss may be reading it—or as though it will be researched by a future employer (it probably will be!).

In my opinion it is ethical and fair for employers to require that our off-the-job behavior should not unreasonably feed back negatively on the reputation of the company. The exact nature of such a requirement has a lot to do with the nature of the business, of course. Off-the-job scandal for a brewery worker is different than for an AA chapter director, for example. It is only fair, in the other direction, that employees be allowed to organize and even to protest and criticize (in a reasonable, factual way) their employers.

Bottom lines: Healthy organizations establish clear, reasonable policies on these matters. Those companies which want to attract innovative, creative, leadership-gifted people need to maintain an open, non-paranoid culture—and not be threatened, overreact, or snoop on their people. Successful employees, on the other hand, will add to their courage and boldness a bit of caution and common sense about what they say and do off the job and on-line. .

-Dr. EthixBiz

Dear Dr. EthixBiz:
As a college business professor I often get examination copies of textbooks from publishers that I did not ask for. Also there are book buyers that often visit my office offering to purchase unwanted textbooks from professors. Is it ethical to sell back examination copies of textbooks if I did not request them?

Philip

Dear Professor Philip:

I think it is probably ok. If you are accepting these examination copies with no real interest in reviewing them, maybe you should inform the publisher(s). Maybe the publisher doesn’t care what you do and views your situation as just part of the process, their expectation of what usually happens. Obviously if you did request free examination copies only in order to sell them and make a few bucks, it would be deceptive and wrong. But in the circumstance you describe I would think it is ok – but I would probably ask the publisher or book agent what they think and would like to do. I would also ask a couple trusted, ethically-grounded colleagues what they think.

-Dr. EthixBiz

Dear Dr. EthixBiz

My boss has been great to work for these past three years. But on a recent occasion I smelled alcohol on his breath when he arrived back at the office after a long lunch at an off site location. He has been such a great boss; he is scheduled to retire in two years; his personal life has brought him terrible pain recently. Is this an ethics problem? How should I handle it?

-Lyndon Baume

Dear Lyndon:

Red flags are waving, but let’s be real careful. We don’t want to hurt this good guy who is going through some personal hell right now—but neither can we stand by and let him hurt others, the company, or himself. Harm is a key ethical value here, along with loyalty and care. But some factual discovery is critical: was he driving back from lunch—or walking or taking a cab? Does the business have a stated policy prohibiting drinking or being under the influence on the job (or are you all employees at a brewery? Just asking!). Also—does he smell of alcohol because he finished lunch with one drink…or just burped…or someone spilled a drink on him…or because he really did drink too much and is inebriated?

If he is really drunk, if he was driving, if he is belligerent, if this has happened several times . . . you probably need to report him to your supervisor or whoever is in charge right away. We can’t risk harm to innocent victims of his driving. We can’t let this behavior create a precedent for others in the workplace. Nevertheless, if the transgression is less severe, my inclination would be to call a taxi and send him home for the day (or drive him home myself) and then have a heart-to-heart chat with him later, maybe helping him get some counseling support.

Dr. EthixBiz

Dear Dr. EthixBiz

A while ago (in the SF Chronicle, 13 April 06, actually). I was bothered to read that Google has agreed to the Chinese government that it will censor its web site to comply with Chinese policy. For example, a search of “Tiananmen Square” outside China gives photos and info about China’s violent suppression of a free speech demonstration—but in China such a Google search deletes these negative images and facts. CEO Eric Schmidt defends the decision as necessary to reach the lucrative market of 111 million Internet users and argues that it is arrogant to walk into a new country and tell them how to operate. How do you figure out what’s right and wrong in this global business case?

Horace Keinscheiss

Dear Horace:

I was troubled by this story just like you. But let’s think it through. Google’s actions don’t seem illegal, and don’t seem to break company ethical standards—though some observers will charge Google with “doing evil” in contradiction to their motto. In the end, this case requires a judgment call. It is not clear that there is one right way to go. It bothers most of our personal moral compasses to think of being party to a government lying to its people. People are harmed by such disinformation (if they believe it).

But think about it this way: if you were in China, would you rather have 99% of Google access—or no access until it is 100%? If you were computer-literate and politically-savvy in China, would you be taken in by their Tiananmen censorship? Chances are you wouldn’t believe a word they say under any circumstances. (After all, are you naïve about press releases and news spin from your own government). And is Google permitted to occupy 99% of the info space and believe that the remaining 1% will come before very long? (This is a lot more than just getting the proverbial nose of the camel in the tent).

Two suggestions: let’s try to ask some Chinese scholars and travelers over here, and even some Chinese citizens on the ground in China, what they would like Google to do in this case. Isn’t it a bit patronizing for us to decide for them? Let’s find out what they want Google to do. If the dominant voice of the Chinese people is “boycott”—then I’m for that. Final thought: could Google just post NO information for “Tiananmen Square,” rather than post a misleading flower show at that site? That way Google is making a quiet but clear statement: no partnership in deception.

I think the takeaway here is that if our company or organization must compromise or adapt as the condition of entering another region or market, let’s try to get real clear on the ethics and values aspects of the deal, seek the opinion of all the critical stakeholders who will be affected by our choices, and make a collaborative judgment on the wisest course of action. Let’s be clear about the trade-offs.
-Dr. EthixBiz

 Dear Dr. EthixBiz:

I am concerned about an older, well-established company that is emphasizing “green” and “environmental” in its marketing strategies. Their entry into the market seems to be more about capturing revenue than actually providing sustainable, energy efficient products. The financial resources are being funneled into marketing strategies rather than actual improvements to the products. The core competencies don’t seem to be there for clarity in communication about their actual “green” characteristics so the company relies on taglines and regurgitated marketing materials. There might be an outward effort to be environmentally-conscious but the underlying purpose is really just increased profits.

-Paul G.

Dear Paul

What you are seeing is what is sometimes referred to as “greenwashing” (remember “whitewashing”). A superficial veneer is painted over the surface to try to create an appearance of being green. This is a very shortsighted strategy for the company, as I’m sure you would agree. First of all, the clock is ticking and it is only a matter of time before their lack of substance and their dishonesty will be exposed by dissatisfied customers not getting what they think they purchased, disgruntled whistle-blowing employees tired of the scam, or outside investigative journalists and environmental activists. It can’t last and the net result will be a badly damaged brand and reputation if not some serious court costs.

Second, greenwashing is a dumb mistake because smart green strategies actually do bring operational savings to companies, prod innovation among employees, and meet a growing customer demand out in the marketplace. Using less energy and fewer resources, turning waste byproducts into valuable resources to reuse or sell, contributing to healthier workers and communities, and helping customers live better lives at lower costs — these are the real payoffs of smart green strategies. Trying to get a quick buck by pretending to go there is plain stupid. The book Green To Gold by Daniel Esty and Andrew Winston, explains in depth the real thing.

Just a final comment: nothing wrong with your company wanting to make a profit here. If it takes ambition for greater profits to get a company to go green, no problem. Some commentators seem to think that if you don’t suffer or act in an altruistic way, you can’t be truly ethical. Nonsense. Of course, we should do the right thing even when it hurts and is not profitable; but most of the great moral leaders and teachers and observers of human history point out that, normally, most of the time, being fair, honest, and ethical will pay off in multiple ways for you and your organization. But you need to be truly, genuinely fair and ethical— you can’t just pretend to be so.

-Dr. EthixBiz

Dear Dr. EthixBiz:

In 2005, with Hurricane Katrina headed for Louisiana, my company asked for volunteers willing to ride out the storm at the company’s refinery in the St. Charles Parrish just outside New Orleans. The refinery would be completely shut down, but the idea was that our small group could provide some level of post-hurricane security and begin doing what they could to start to assess damage and try to marshal resources to clean-up, repair, and restart the plant. A small band of volunteers from across the plant’s organization agreed to stay and created its camp in the most secure building on the site. After a very tense and stressful night, the group emerged unscathed to begin their post-storm assessments.

Although none of the employees publicly faulted the company for making the request, some employees stated that they would be unwilling to volunteer for such duty again. Was this a fair, responsible, and ethical request to make? Did the company exploit its position of power in the employer/employee relationship by making such a request? What responsibility does a company have when considering similar situations for assessing risk in its own and its employees’ decisions?

-M

Dear M.

As you know there are lots of jobs in which physical danger goes with the territory: fire fighters, police, bomb squads, medical workers, and so on. There have been times when a military draft has been in place and participation in hazardous duty was not exactly voluntary. And we might also think of mine-workers or other dangerous jobs where the circumstances of life and education left little choice to individuals about whether to participate.

In your case, this was not part of your job description or expectation. But as long as your participation was informed (you knew the danger) and you had a choice to go or not, we are on the right track so far. The company should do all it can to make sure you are well-equipped and as safe as possible — and it should compensate you somehow for your extra, dangerous duty. They should not place undue pressure on you to take this assignment (the CEO should send himself/herself first if need be) or fail to compensate you for what you have done. And, yes, this shouldn’t take the company by surprise again: it should have a well-developed plan for such emergency circumstances and not have to make any surprise requests in the future. And bravo to you guys for stepping up to a dangerous and difficult task.

-Dr. EthixBiz

Dear Dr. EthixBiz:

In the line of work I am in, our employees have exposure to highly sensitive and highly confidential financial and legal information.  This information is sent to our employees via hard copy mail, faxes, and emails.  We have data storage bins and shredders to ensure that this sensitive information will not be exposed outside of our offices. 

However, recently I was walking by the printer and noticed that a printout of a list of names with social security numbers was in the ordinary recycling bin.  Knowing which of my colleagues had been working on this file, I went over and dropped the list on his desk and reminded him gently that he should be careful with them.  He then really shocked me by saying that it was not a big deal, that the regular recycle bin was fine because the material didn’t not have any financial or legal material.  I told him that the paper had names and social security numbers, but he kept insisting that it was not a big deal.  After a few minutes of conversation he said that he would “try” to remember to put anything like that in the secure data recycling box, if it was not too full.

Was this as big a deal as I thought or was I being overly concerned?

-S.M.

Dear S.M.:

You were definitely right to be as concerned and persistent as you were. Thank you. Maybe that was my info! In our era such personal information is very vulnerable and must be carefully protected. Any company that does not protect its sensitive client information must be called on the carpet and vigorously prosecuted in any case of harm to the clients. It can be a horrible experience trying to regain your identity and security from acts of theft and breeches of security.

Your actions were right on, perfect. But it also is important in this case for you to alert management that some additional, clear, convincing, and repeated training on company policy is needed. Some kind of redundancy or better supervision is also important. Don’t just depend on one person to carry out these privacy protection policies — make sure there is a second responsible person checking to oversee and make sure it all gets done properly and completely.

-Dr. EthixBiz

Dear Dr. EthixBiz:

My company, after a management change related to recent economic events, informed the management team that approximately 2000 employees and contractors will be laid off. I was told who was leaving my staff but was instructed not to inform these individuals before the “reduction day.” Telling these individuals in advance might result in decreased productivity and perhaps even in retaliatory measures by some in their “lame duck” period. My problem is that the wife of one of my people about to lose his job has just discovered that she has multiple sclerosis. Alerting him of what is to come could give him a jump on finding a new job in a very difficult time for his family and finances. But what is the right thing to do — for this employee? For all those about to be laid off?

-Art Thompson

Dear Dr. EthixBiz:

My technology company just made a public announcement of a ten percent reduction in workforce because of the economic downturn. As a senior manager I was asked to rank my personnel and give the names of my bottom 10% to HR. These names are now set in stone and will lose their jobs here. My problem is that “John” is on the list and he just dropped into my office to tell me that he and his wife are about to buy their first home, putting down about $100,000 that they have saved together over the past few years. I feel like I should warn him but then I could get in trouble with my company. Also I don’t really know how he would personally react to a warning of an imminent loss of his job.

-Mo

Dear Art & Mo

Believe me, you are just two of thousands of managers in the uncomfortable position of deciding who to layoff and/or giving them the bad news. Let’s hope that things turn around pretty soon and we can do the much more pleasant work of recruiting and hiring.

In the meantime, the concerns are legitimate that your companies have about work slowdowns, bad morale, and even sabotage or retaliation if specific workers are told they will be laid off at some specific date coming up. I would not violate that company policy in either of the cases you mention (related to the MS diagnosis or the house purchase).

Rather, I would warn my whole staff (even better if the CEO warns the whole company workforce) that we are going through perilous, uncertain times in which companies, including our own, are being forced to lay off even good people, sometimes making deep cuts into the workforce, just to survive. For that reason, no one should proceed as though “business as usual” is guaranteed to continue indefinitely. No one should panic but neither should anyone make any rash career moves or major financial decisions without thinking through these current uncertainties and what they might mean. That should be enough to put everyone on alert, including the problematic cases mentioned above.

It is thinkable that a more extreme case could arise, of course, but in such a case I would advise consulting with upper management and jointly deciding whether the circumstances are exceptional enough to lay the person off immediately (maybe with some severance assistance) rather than delay until the planned “reduction day.”

-Dr. EthxBiz

Dear Dr. EthixBiz

I need your opinion on a hypothetical case — which has some real parallels to what I am going through.

You are a sales representative for a new synthetic fiber that has excellent properties in every respect but one. To this point no one has been able to treat or process it so it will be flame-resistant or flame-retardant. It has therefore been outlawed in the USA as a fiber for apparel. Sales have dropped drastically since the fiber is now legally permitted only in certain industrial products. Hundreds of jobs are at stake if this company fails to find a way to market its product soon.

The president of Tiny Tot Sleepwear stops by your office and surprises you by asking you to quote prices and delivery schedules for a large order of your fiber. When you remind her that the fiber is not legally useable in apparel, she says, “The law only prohibits selling such apparel in the USA. I’m going to manufacture it here but sell it in South America where there are no legal restrictions on this material.” At this point, Knowing only what we have been told so far, I am inclined to turn down the business.

But then you find out that many children in the proposed market have inadequate clothing. The alternative may be between sleeping in cold, inadequate clothing—and sleeping in your warm, inexpensive but non-flame-resistant clothing. Should this change my mind?

And then to make matters even more difficult, you find out that most of the prospective buyers of your product use open fire ovens and fireplaces for cooking and heating in their living quarters—a more dangerous environment for accidental fires and burns than the typical American home.

How in the world do you resolve a case like this?

-Jack C.

Dear Jack:

This case has, with various modifications, been on my desk since the mid-1970s. There are actual historical cases with many of these details. It seems anachronistic to have a case about manufacturing clothes in the USA when most of our textile and clothing manufacture is now off-shored—although American Apparel seems to be a thriving Los Angeles-based clothing manufacturer these days.

The basic lessons of this case are about how our values can stay constant (always concerned to protect the health and safety of children, concerned not to let any racial or national prejudice allow us to treat others as less valuable, always concerned to save the jobs at our company) . . . while our changing awareness of the facts pushes us to one conclusion or another. First, we won’t sell . . . but then we realize that this clothing is better than freezing to death . . . but then we decide again not to sell because the risk is unacceptably high.

Here are some other things to think about: You may be the sales rep but the stakes are too high here for you to play Lone Ranger: buy a little time and go back to consult with your boss. Also: are American safety standards justifiable? Are the fire-retarding chemicals in the material themselves carcinogenic? (Technological progress is not automatically good—just think of the drugs that enter the market to great fanfare, only to be withdrawn after side effects become apparent). What do the community leaders and parents in our proposed market think and want? (let’s not be patronizing and decide for them). Are there creative, imaginative win-win solutions? (e.g., use the material as the lining in between two panels of fire-resistant cloth? Sell it with warning labels? Manufacture and sell spark-arrestor screens for housing in the proposed market?

-Dr. EthixBiz

Dear Dr. EthixBiz:

I work in the medical products industry. Our products are commercialized between businesses so the impact on the end user (the patient) might not seem of great concern. But higher prices certainly can impact patient care down the line. If hospitals or small clinics cannot afford to buy our products from the companies we sell them to, or if they have to turn around and sell them to patients at very high prices, there can be a direct impact on patients seeking treatments.

The company I work for has a profit margin of 200% on some products — though, even with that, our product sale prices on the whole are among the lowest in the industry. Some other companies have a mark-up two or three times as high as us. Our CEO argues that we might have a very high profit margin for some products but that just compensates for lower profit margins that we have for other products. He also argues that the overall net profit of our company (about 20%) is one of the lowest in the industry. But I still feel uneasy about these business practices.

-A.

Dear A.

“Fair pricing” is a topic with millennia of debate and discussion. Obviously the cost of labor and materials, research and testing, shipping, etc. — these traditional factors play into the fairness of a price along with the supply and demand of the market. What we hope for is that the market will work in the following way: if there is big demand and your prices are unreasonably high, others will enter the market and compete against you by offering that (or a similar) product at a lower price. That has usually proven a better method for setting prices than having some political central committee make these decisions.

Unfortunately the market reacts slowly sometimes — and other times the market is prevented from operating freely (as often by business as by government manipulation and control). We can accept that when we are talking about luxury items. When we are talking about necessities for survival (food, medical care, safety, etc.) it is hard to sit back and watch a desperate, hurting person held hostage or exploited by those in possession of the products they need to survive.

I see questions at three levels: first, as an individual manager, what are you all about? What will be your legacy in the (medical products) marketplace? Maybe you can influence your company to develop a more balanced, thoughtful approach to pricing, profits, and patient care. Or maybe, in the extreme case, you need to find other employment and refuse to be part of a particular company. Not easy.

Second, what are our companies all about? Only thieves and beggars can truly claim that “taking your money” is their core mission. Other businesses have to understand their missions as the delivery of some product or service – in light of which customers will write a check. Keeping our companies focused on the mission, instead of the money, ironically, usually results in sustainable profitability (the customers keep coming back and they promote you to others). Pricing decisions need to be made in light of the mission, not merely in reference to the financial bottom line in a short term, narrow sense. We sometimes say “govern yourself — or be governed.” If companies wish to enjoy increased regulatory freedom they must earn it be practicing self-regulated ethical business.

Third, what kind of a society and country do we want to live in? One where businesses can freely innovate and come up with solutions to people’s (medical and other) needs and desires? Yes! One where suffering people are forced into poverty and denied the help they need? No! Both charitable and political responses will be part of the overall solution. We can’t rely on business alone.

So maybe you can influence your company to think deeply and wisely about its mission, core values, and operations. And let’s all think about how we can give — and vote — to address the problems our business world cannot resolve on its own.

-Dr. EthixBiz

Dear Dr. EthixBiz:

I have to blow off some steam somewhere so you get it. I am so angry about the big bonuses the banking executives are awarding themselves even after so many of them were in charge as the banking collapse took place last year and all the bailout money was necessary. I have read in your EthixBizine about the Toyota executives and also those at places like Whole Foods, Costco, and Southwest Airlines who show restraint even when their companies are doing pretty well. What is Obama’s “pay czar” doing anyway? So many people like me in the banking industry have been laid off or taken salary and benefit cuts. I worked hard and performed well for my bank for years. To watch my old bank struggle, to think that I and my colleagues could have helped rebuild it, and now to read about our CEO’s bonus — I could go crazy.

-Really Ticked Off

Dear RTO

I can relate. My own wife got laid off a year ago by one of the troubled giant banks after decades of great service to her employer. It seems that Obama’s pay czar Kenneth Feinberg has been trying to reign in executive compensation at the companies which have received “exceptional assistance” from the government (i.e., TARP funds). AIG has been especially resisting Feinberg’s limits and gotten around them with $165 million in “executive retention” payments last March, with another $198 million scheduled for this coming March. Twelve out of the top twenty-five execs at AIG have quit over this unacceptable pay! And we have seen several of the big banks scramble to pay back the TARP funds early so they can not miss a beat on their uncontrolled executive payouts.

RTO, you have three weapons: your vote, your voice, and your money. That’s about it. Give your vote only to politicians who represent your values and policy preferences. Raise your voice among your friends, colleagues, neighbors, and family to increase people’s awareness and persuade them to join you in supporting a better way. And finally, move your money to banks and merchants who practice the ethics and policies you believe in. Try to lobby your church, your club, your employer, your city to also close any accounts with the businesses you do not believe in and push them to do their banking and other business with ethical, responsible companies. Don’t sell out on this for the sake of convenience. This is the free market: give your money only to companies whose products, practices, and values you believe in.

-Dr. EthixBiz

Dear Dr. EthixBiz:

My boss thinks ethics is a waste of time. I am totally fired up about business ethics, especially in the more holistic, missional and cultural style you teach and promote. But my boss (and our company leadership as a whole, as far as I can tell), shows no interest when I have tried to share my concerns and interests with him. He thinks ethics is a soft “luxury” concern with little business value added. He says that people get their ethics by the time they are teenagers—or they’re never going to get it. He just shuts down my suggestions that we could strengthen our company by taking a look at our ethics statement and training. Is there anything I can do?

-“Ethically Concerned” (submitted in similar form by more than a dozen questioners)

Dear “Ethically Concerned”:

This is often a very discouraging situation. “Tone at the top” and enthusiastic, skilful moral leadership are so important in today’s business climate—and your company is missing out. Here are some ideas:

  1. Volunteer to be on (or lead?) a small committee to do a study of what your competitors do with mission, values, and ethics. You may have to donate some time outside normal work hours to make it happen but this could get things going. Bosses often keep one eye on the competition.
  2. Feed some news stories toward your boss—stories of bad ethics and their consequences, stories of exceptional ethics and success in admired companies. Fear of bad consequences can produce change. But often managers lack the imagination or awareness to know the upside of good ethics. Give them lots of positive examples.
  3. Give your managers copies of David Gill’s It’s About Excellence: Building Ethically Healthy Organizations—or other literature making the case for good ethics in business.
  4. Find two or three or more colleagues to begin a weekly (biweekly? whatever works) lunch discussion group on business ethics and corporate social responsibility. Brainstorm ideas for bringing about change in your company.
  5. (Worst case): Look for another job in a more ethically congenial environment.

-Dr. EthixBiz

Dear Dr. EthixBiz:

Most if not all organizations require their employees to sign Non-Disclosure and Non-Compete Agreements, designed to protect proprietary information from being disclosed to competing organizations and to prevent ex-employees from taking similar roles with other organizations in the industry for a period of time (two years in my experience).

Seven months after the resignation of a Vice President I worked for I noticed on LinkedIn that this ex-VP had started his own company. Intrigued, I visited his web site and was surprised to see that his new venture was eerily similar to the business model of our company where he was a leader and I have no doubt that he is using technology similar to what we developed. Even if he is not technically breaking the non-compete agreement, is there an ethical issue here?

-Mike

Dear Mike-

In addition to the legal and contractual issues here, the ethical concerns regarding fairness and integrity are certainly significant. If I create something while being paid to do such creation, it seems only fair that my employer owns that creation, whether it is a material thing or an immaterial intellectual property. If, however, I bring part or all of that idea from outside into the company, unless I clearly agree to sell it to the company, it seems fair that it remains my own, even if I let my company use it.

But these kinds of issues are very complicated, sensitive, and even ambiguous around the edges. That is why it is essential to have a written agreement about these matters at the beginning of an employment relationship. And having signed on to the agreement, it is important to observe it. For employers it is wise to be very generous in rewarding creative employees rather than ignoring or aggravating them into leaving to become your competitor.

In your particular case, the LinkedIn profile (probably) and the new company web site (certainly) are a matter of public record and you should not hesitate to alert your upper management to the new company’s existence and leave it to them whether to investigate further and whether to make an issue of this competitor. I don’t think you should remain silent, nor should you approach your ex-VP on your own.

-Dr. EthixBiz

Dear Dr. EtixBiz:

While I liked the example of HP execs choosing to freeze salaries (across the board from top to bottom) versus the UCB president cutting headcount and raising tuition, I’m wondering if you can help me level out the apples and oranges comparisons of the nonprofit world. HP, as a for-profit enterprise, can simply wait until demand returns whereas in the nonprofit arena my organization with its endowment invested in the market, has incurred real losses ($millions and falling) and these won’t return, nor will the losses incurred due to reductions in donor giving.

So are there ways to reduce expenses in an ethical fashion? We’ve already cut our operating budgets substantially but need an additional few million, which will tend to be the kinds of reductions that go out on two legs. Even if we reduce salaries across the board, if our endowment continues to plummet, we may not be able to avoid headcount reductions.  Then we’ll be asking staff to accept reduced salaries along with increased workloads.  Part of my challenge is dealing with differing mentalities about what a full workload looks like.  It’s fairly common for folks to expand the work to fill the day and lose perspective about what’s mission-critical. 

-S

Dear S-

I sympathize with what you are going through. I have been through similar financial/economic crises working with non-profits in 1988-90 and 2001-03. It is very painful. In the first instance my colleagues were not enough interested in shared sacrifice or radical change and the organization died four years after I left, with all its accumulated assets of the organization spent in vain on “business as usual.” In 2001-03 my colleagues did sacrifice to the max but we still had to radically adjust our operations and expectations.

But I’m not so sure this is “apples and oranges.” For-profits need investors; non-profits need donors; both need customers. I don’t think your endowment is any more fated to disappear and not return than would be the case with a for-profit. All the problems you mention are true of for-profits as well as non-profits.

The core issue is “why do we exist?” And what kind of culture and core values will enable us to achieve that purpose with excellence so that clients/customers will want us, investors/donors will throw in with us, and we will be sustainable through good times and bad? Then find people who share deeply and passionately that mission and those values and will work together as a team to make it happen. It may well be that hard times require a leaner staff and more focused operation. But when we are as lean as we can go and still survive, shared sacrifice in hard times, shared fruits of success in good times, is the way to go. Those who don’t want to operate like that should be the first to go.

-Dr. EthxBiz

Dear Dr. EthixBiz:

For e-commerce companies, customer mailing lists are a significant asset. Because of the low order rate from catalog mailings and email blasts, having a large and solid list of customer info with previous order history is crucial. While many websites make it easy to opt out of their mailing lists, others aggressively market to the masses even if the email is unwanted. Email is cheaper than catalog mailings and has a more immediate response. This has created tremendous spam volume for everyone. However, I have happily purchased items I had not expected to buy (discounted plane tickets, flowers, gifts) when tempted by an unsolicited email ad. Should retailers stop mining our order history for info and stop emailing ads out to everyone or always wait for customers to request mailing list removals?

-Joyce S. 

Dear Joyce:

The basic ethical issues relate to justice and privacy.  The justice principle is that no one has a right to affect another’s life without their permission.  For example:  Your right to swing your arms ends where my nose begins.  Your right to make lots of noise ends where my hearing begins.  Your right to fill the air with smoke ends where my dining space begins.  Your right to use up my time or the space in my e-mail inbox . . . same thing.  The privacy principle is that you do not have a right to disclose (still less “profit from”) my personal information or property without my informed consent.  Personal life, health, community, and civilization itself would break down if these principles and rights were not respected in both law and custom.

These principles and human rights are the foundation for a response to the kind of situation you describe, but they need to be balanced with other ideas and interests and applied in a wise and practical way.  Social and economic life would end if we couldn’t take the initiative to get a friend’s or a stranger’s attention and interrupt them with a “hello.”   If a business (or school, or community group, etc.) could never get our attention and put its information before us about its existence, services, and products, not only the business but we ourselves would often be impoverished.   So our right to be left alone must be balanced with our human need for freedom, communication, and relationships.  Even our privacy rights cannot be absolute when there is overwhelming evidence that our private activities might threaten the lives of others.

My view is that organizations with whom we have done business should be able to follow up that business by informing us of other products and services our previous business with them suggests might interest us—as long as these communications are not unreasonably frequent or intrusive (a judgment call).  But I do not believe they should sell or share our purchasing or contact information to anyone else without our explicit “opt in” permission.  Even with their own communications to us, their previous customers, whether it is print material mailed to us, telemarketing, or e-mail advertising, I believe they should always provide us an easy, accessible “opt out” process.  So you, or a business, must have reasonable freedom to get our attention and say “hello”—but you must also take “no” for an answer and not continue to harass us if that’s our clear response.

If businesses do not respect justice or privacy in these matters, the people on the receiving end will eventually be aggravated enough to boycott and badmouth the offending companies—and we may even get our politicians to pass laws and regulations to restrain and punish the spammers.  “Govern yourself—or be governed” ought to be on the wall of every executive’s office.

-Dr. EthixBiz

Dear Dr. EthixBiz:

I’ve worked in my current department since 2005 as an assistant to 17 specialists.  The office is very busy and everyone, including myself, works very hard.  The only advancement opportunity in the department is to a Specialist position when one is vacated.  However, out of the last six advancement opportunities, neither the previous assistant nor myself were promoted.  The specialist position doesn’t require experience so anyone with a general clerical background is eligible to apply.  The assistants, on the other hand, do gain quite a bit of technical experience working  alongside the specialists.  They receive excellent performance evaluations, which should give them a competitive edge over the other applicants, not to mention the significant contribution the assistants make to the success of the team goals throughout the year.  

Unfortunately, the assistants have not been selected for promotion; interview feedback indicates they lack minor characteristics  and someone else, less qualified, gets the job.  Additionally, the selected candidates were usually given short-term (four month) training opportunities just before the vacant specialist positions were announced, narrowly qualifying them for an interview and the minimum standards for application for the position.  To add insult to injury, after the assistant trains and evaluates the candidate‘s progress during the four month assignment, the hiring manager selects the candidate using the evaluation submitted by the assistant!  Needless to say, the assistants become angry because their hard work has not been, nor likely will be, valued and rewarded.  On the surface the hiring manager may pre-select, but it’s difficult to prove.

-KG

Dear KG

I sympathize with your sense of the unfairness and injustice of it all. It sounds like these hiring decisions come down to a subjective judgment and the hiring manager is somehow blinded to the qualifications of experienced assistants. It is unfair and unethical to discriminate against the assistants in this case.

Complaining, protesting, and venting probably won’t help much, unfortunately. One approach would be to (alone or with the other assistants) have a serious sit-down discussion with the hiring manager and any other powers-that-be and express (mildly) your frustration and concern and ask for explicit recommendations on how to strengthen your candidacy for the next round. Another tactic (more difficult) would be to push for some changes in the recruiting and hiring process itself to make it more transparent and fair. More extreme would be to gather evidence and facts and get a labor attorney to advocate your case. The ultimate act is to get your resume ready and be on the hunt for other employment.

What employers need to realize is that if they mess up on these hiring decisions they likely (a) hire less talented, less capable people than they might, (b) contribute to a negative atmosphere in the workplace, (c) could lose some good people, and (d) are exposed to lawsuits and reputational damage.

-Dr. EthixBiz

Dear Dr. EthixBiz:

I am the business development director for a company with multiple physical therapy clinics across the western USA.   My ethical dilemma is based upon the number of patients a physical therapist can see in an hour’s time.  Clinic profitability depends on how many patients a clinic can see per therapist; however, there is a fine line between good and bad quality of care depending on how much attention each patient receives.  From my perspective as a manager, a good therapist can treat up to three patients per hour, and an excellent therapist may treat as many as four.  But the therapists themselves rarely like to treat more than two patients per hour in order to meet our stringent quality of care standards.  When our clinics get extremely busy, I would rather see the clinics get as many patients in as possible, rather than turn patients away because of scheduling complications.  I am constantly battling my therapists during our peak periods on this topic.  Any ideas how to do the right thing here?

-Chris G. 

Dear Chris

I don’t think there is any easy, clear cut answer to this tension between adequate clinical profits and adequate patient care. But the stakes are important for both the clinic and the patients so it is important to think it through carefully. The top priority has to be the physical health of your patients, it seems to me. If you get a record and a reputation of short-changing patients, you will eventually pay. So are these patients being given the care their condition requires? If they really need 30 minute treatments to recover from their condition, then they need to be told this and offered the treatment, even if you have to raise your charges for a visit. If they are fine with just a twenty minute treatment, then inform them of this and deliver. But it sounds like your clinic has established “stringent quality of care standards” that require 30 minute visits. And yet your opinion is that an excellent therapist could see a patient for only 15 minutes. Both standards can’t be right.

Get some clarity on what the standard of care really needs to be (get some additional expert opinions outside of your current team). Make this therapeutic standard public and clear to your patients and your therapists. Then develop a financial model that will be competitive and profitable. Be as creative as possible on both the revenue and expenditure sides. Then if your competitors are undercutting you by delivering a lower level of care, turn that into an aggressive sales pitch focused on testimonials from experts and former patients that your quality approach is the only way to go, that you get what you pay for, that getting quickly shuttled in and out of some industrial clinic isn’t going to get the job done for your physical rehab. You can save a few dollars in the short term, but spend thousands in the long term.

I understand that as the clinic’s business manager you want to drive the business forward and make a profit. Efficiency, yes. But if you increase your profits by cutting corners on quality and service the chances are good that you will eventually fail.

-Dr. EthixBiz

Dear Dr. EthixBiz:

Multiple times every day now we are hearing messages all over the media that California Proposition 16 in the upcoming June election is necessary to protect the “taxpayer’s right to vote” — specifically by requiring a 2/3 vote for any municipality to break away from PG&E and form their own power company. Apparently Marin County and San Francisco political leaders have taken steps to replace PG&E without the support of their electorates and PG&E is now standing up for freedom and democracy. Do you agree with Proposition 16 and PG&E’s campaign for our rights and freedoms?

-Manny

Dear Manny:

I’m afraid not. I’ll explain why but first let me say that I believe a lot of great, ethical people work for PG&E — and some of PG&E’s movements toward alternative, greener energy have been encouraging. Unfortunately the great people I know at PG&E do not get to set its agenda or values.

PG&E’s campaign for Proposition 16 is one of the most unethical, cynical, deceptive actions I have ever seen. It reminds me of George Orwell’s famous novel 1984 which introduced the concepts of “doublethink” and “doublespeak.” PG&E calls proposition 16 the “taxpayers right to vote act.” But it is actually a highhanded attempt to limit taxpayers’ rights. If Prop 16 passes, 34% of a population can stop the 66% from replacing PG&E with a better, cleaner energy company. And PG&E did not ask its customers for two-thirds approval to spend $35 million to pass this proposition (where do you think PG&E gets its money? They like to say otherwise but it is customers who ultimately fund PG&E’s budget choices). PG&E’s leadership does not believe in that 2/3 majority guidance for itself; no, for them, a tiny management and board elite decides what’s best for all the rest of us. Totally hypocritical.

We already have elections of city councils and other public officials. If we don’t like what they do, we vote them out of office (51% will do it). Of course there is corruption and incompetence in our government and it would be great to avoid that. But just because our elected governments are imperfect, should we hand more power to PG&E? Is PG&E worthy of such trust so that it becomes almost impossible to replace? No way pal. PG&E is not worthy of trust and anything we can do to reduce its power and make it actually compete in free markets is a step in the right direction. Proposition 16 is a move to entrench PG&E as an untouchable monopoly: to give it socialist power — but without commensurate accountability to the people.

PG&E is spending $35 million to pass Proposition 16 to protect itself from free competitive markets. Why didn’t PG&E use the $35 million to reduce rates, improve customer service, and develop cleaner more sustainable energy sources? Because PG&E’s real mission seems to be to line its executive pockets with as much of your money as possible, not to provide clean, reliable power to the people. PG&E has never earned the right to our trust (or our business): their monopoly exists not because they are good but because of a failed political system that they manage to control.

Why don’t I trust PG&E? First, I am still outraged by their corruption, irresponsibility, and denial in the Erin Brockovich/pollution scandal a decade ago (which resulted in a $333 million dollar settlement to those injured by PG&E). Second, the $84 million dollars in “retention bonuses” paid to 17 PG&E executives in 2004 as PG&E emerged from bankruptcy was an outrageous act of theft by PG&E leaders. The CEO at the time took $17 million for himself (he was named by Business Week Magazineas one of the worst CEOs of 2003). Third, the current PG&E CEO, a Goldman Sachs veteran (great preparation!) was the CFO at the heart of the retention bonus scandal and was rewarded by being named CEO in 2005. Is this the best PG&E could do? Mr. CEO came into office announcing his commitment to high level Ten Commandments ethics. But somehow in his Orwellian mind “Thou shalt not steal” means “go ahead and take $10 million in compensation for 2009” (74% higher than the median compensation of large scale utility companies). You run a monopoly sir, not a competitive business. You are not an executive genius; you are shooting fish in a barrel. Your big bonuses are for exploiting people who have no choice whether to buy your stuff. We should give this guy more power and entrench him in office? Fourth, PG&E is installing its new “smart meters” at businesses and residences. Have you noticed all the news stories about spikes in peoples’ bills? The smart meters not only put meter readers out of work, they extract more money from helpless customers. These dumb meters were not fully and properly tested and we are pretty dumb to give more power to this kind of company. Fifth, in 2006 PG&E spent $11 million to prevent Davis, Woodland, and West Sacramento from defecting to the Sacramento Municipal Utility District. (Did they ask you about diverting those millions to this self-serving, anti-democratic campaign?). Now they are spending $35 million to make their chokehold policy state wide. They can’t depend on superior products and services to win their contracts or your loyalty so they spend vast amounts of money for what is nothing less than blatant, doublespeak propaganda.

I would be happy to pay my gas and electric bill – even at a higher rate — if I thought my payments were supporting (a) cleaner energy initiatives and (b) subsidies to keep the lights on for unemployed families and struggling small businesses in our recessionary times. But I am not interested in giving ten cents, to say nothing of a two-thirds majority chokehold on communities, to the pitiful organization describe in the previous paragraph. NO on 16. This is not a partisan issue. I am neither a Republican nor a Democrat.

-Dr. EthixBiz

Dear Dr. EthixBiz
I signed a contract with [a well known and respected publisher] for my book in 2004. In my contract is a termination clause that reads “In the event that the Work shall at any time be out of print, the Author may give notice thereof to the Publisher, and in such event the Publisher shall declare within thirty days… then this Agreement shall terminate and all rights granted hereunder shall revert to the Author…”.There is a moral underpinning in any contract, namely, the two parties enter into an agreement with a common understanding of the language used in defining the various clauses in the contract. In 2004, the acquisition editor and I understood the words ‘in print’ (and hence out of print) to mean a batch of books printed using traditional technology, which in my case was 2000 copies. A new print implied another batch of similar number, a fact emphasized by the printing number described on the copyright page of each book.

In January 2013, I contacted the publisher regarding the status of my book after finding frommy royalty statement that 35 copies of my book were returned with no new sales. I was informed “…your book remains in print via our auto-replenishment program”. Auto-replenishment is the process by which a batch of 50 copies is printed using print on demand (POD) technology.

The POD technology was not discussed nor mentioned in any part of my contract. It is a unilateral redefinition of the terms of my contract that renders the entire termination clause meaningless, as no book will ever be out of print because of POD technology. No author would sign a contract that says the author gives up his/her right in perpetuity to a publisher. This is an unethical practice. What do you recommend?

-Disgruntled Author

Dear Disgruntled:
As an author I am, of course, very sympathetic to the author of this case. My seventh book had a somewhat similar fate: a publisher who controlled it but sat on it without promoting it. In the end I agreed to pay $1000 to buy back my rights and republish with another press. The original publisher did invest some labor in designing my text, putting in charts and diagrams, etc.. though maybe not $1000 worth. Regaining freedom and control were worth my ransom payment in the end.
I agree that the common assumption of the meaning of “in print” when you entered into the contract should decide this case but you may need to threaten or carry out a law suit to get that established. And that might cost more than just buying them out. You could consider contacting other authors published by this house and see if collectively you could bring private and public pressure on them for some justice. If it happened to you there are probably other victims. Complain to industry organizations and publications.
Going forward: pick your publishers carefully! Be very careful about the fine print and about anticipating future industry developments.

Dr. EthixBiz

Dear Dr. EthixBiz:

Earlier in my career I worked for a residential real estate development company. My job in project management required me to visit many of our jobsites to assess work in process. Our projects were located throughout the western part of the US, and often required overnight trips. My manager, the VP of construction, also traveled at the same time to these locations for business reasons. And what seemed to start out as invitations to dinner or sharing rides to the jobsites out of professional courtesy and convenience (because we stayed in the same hotel or had similar schedules), turned into him making unwanted advances toward me. Initially I tried to politely ignore them but they became more overt. At this point I did directly and repeatedly refuse—even though he threatened me with poor performance reviews and even the loss of my job among other things. For unrelated reasons there were management changes, and he was subsequently laid off. But I had never reported the incidents during the time they occurred, or after he had left the company. I liked my job and wanted to keep it. I was young (and  naive), and at the time thought I should try to handle it myself.

While my boss’s behavior was obviously unethical, I have wondered since then if my not reporting it was also wrong. That is, was doing nothing ‘official’ also ethically wrong?
-Ann-Helen

Dear Dr. EthixBiz:

As a Sales Director I was meeting with one of my largest national accounts to review the upcoming contract year. In attendance at the meeting were the Vice Presidents of both respective companies, and several other Sales Directors from around the country. After the sales meeting, we all went out to dinner to celebrate the big deal we had finalized that afternoon. During dinner, the customer began drinking heavily, and started verbally and sexually harassing me (I happened to be the only female at the dinner). He crudely implied that the reason I was able to increase business with his company every year was not because I was intelligen and did a good job handling their account, but because I slept with his supply managers. I made a choice at the time not to speak up for myself, partly because I was embarrassed and did not want to cause a scene, and also because I did not want to jeopardize the relationship with what was our company’s largest customer.

The Vice-President and several other of my male counterparts witnessed this but no one said anything to the out-of-line customer. Later my VP told me “It’s a good thing you can take care of yourself!” I am still troubled by what happened (and didn’t happen) at this meeting.
-Anonymous

Dear Ann-Helen & Anonymous-

You would think that with all the mandatory sexual harassment training sessions that take place these days we would be beyond the scenarios you describe. Both of these perpetrators deserve to be fired for going way over the line. This is not “grey area” stuff but an outrageous assault. I admire both of you for your personal toughness and persistence — as well as your business accomplishments which are obvious in each case — but you are right to be dissatisfied with what happened.

Ann-Helen — you should not have to relive the abuse you took, but your later reflections are on target I think: not reporting a harasser can leave others exposed to his continuing predatory behavior. Companies must make very clear their standards and expectations for respectful communication and behavior. They must create and publicize multiple, safe, reporting channels and encourage all their people to use them whenever those standards are violated. From the top on down, your company must insist on professional behavior as a condition for any employment, to say nothing of achieving management responsibility.

Anonymous — your management colleagues need to be called on the carpet for failing to stand up to the creepy customer. They have no excuse and should be reprimanded and disciplined, perhaps even fired, for enabling without objection this verbal assault on you. It is a total outrage. They should have spoken up when the comments started. If they continued, they should have walked out with you and gone on to an even better restaurant to recover! The insolent representative of your customer company should be reported back to his management by your senior management (do they know what this guy is doing?).

Final note: companies (and individuals) need to set, communicate, and enforce clear boundaries on what is unacceptable speech and behavior. No question. But as long as companies only pursue a reactive, damage-control strategy (detect and punish), the disease will continue. This is why Dr. EthixBiz’s crusade is always focused on “mission-control,” proactive, holistic, culture-building strategies. Embed the core value of R-E-S-P-E-C-T at every level of the company culture, in all of its systems and processes, in all of its hiring, evaluation, compensation, and promotion. Get the wrong people off the bus. Put a model of respect in the driver’s seat.

-Dr. EthixBiz

Dear Dr. EthixBiz:

Your unblinking support for Toyota is very disappointing.  Here is a company that has obviously not been honest with us (to what degree we don’t know yet) and yet you sing their praise.  Furthermore, this dishonesty appears to have been driven by their desire to be the “biggest” car maker in the world (note that I did not say the “best” car maker) by surpassing GM.  I have owned many different types of cars and many have been great cars.  Ford happens to be doing some great things, and avoided taking any of the government hand out money.  I won’t go so far as to say Ford is a perfect company either, but it is disappointing to see you avoid any criticism for Toyota when their current actions certainly deserve some, and ignore a strong company like Ford.  I would argue it hurts your credibility; don’t be influenced by your luck of not owning one of the Toyota cars that uncontrollably accelerates leaving drivers injured or worse.
– Craig Crawford

Several years ago, I remember reading an article about Toyota’s obsession with becoming the largest automaker (i.e. knock GM off the totem pole) in the world and what effect it was having on their top engineers — negative impact to their product. The crux of the story was that Toyota may be burning out their top engineers by working them relentlessly from one project to another and eventually there might a huge “cost” [read: design failure]. They interviewed the chief engineer of the first generation of the Prius and one thing that stood out in my memory was that he was living full time, 7 days a week, with his team in the “Toyota” city and he hadn’t seen his family in 6 months. BTW- my wife drives a 2008 Toyota Prius and we both love it. We are averaging 47.5 MPG.
– Mike Bek

I think you are leading with your heart and not your head in comparing Toyota with J&J.  J&J initiated its own recall.  They did it within a very short period of time after the death from the product.  Their executives assumed the brand was dead.  They had an open process, even inviting the press to their deliberations.  No one pressured them to take the actions they took—they did it on their own.  Toyota has been pushed on this issue for two years, and has hidden (until recently) their concerns, not acting till the government came out with an announcement.  I, too, hope they get back on track.  They once were an open company with great practices.  But they will have a longer path back because they dug themselves into a very deep hole.  
-Al Erisman

Dear Craig, Mike, & Al:

Thanks for pushing back on this. Just a couple points:

  1. I sing the praise of Toyota’s long track record (as well as my personal experience); I am not a shareholder.
  2. I did say when we find out if someone knew and covered up they must be held responsible. I agree completely on this and do not believe Toyota gets any kind of pass for any reason here.
  3. My prediction is that their culture is strong enough to rebound (I could be wrong of course).
  4. Ford’s denial and cover up for their Explorer, and Pinto before that, was longer and of graver consequence (so far — I suppose it may get worse for Toyota).
  5. Did you notice the New York Times story (11 March 2010, “Braking Bad” by Richard A. Schmidt) that speculated (based on the Audi problem with unintended acceleration in the 1980s on which Schmidt worked) that the problem may be mostly human error — pressing on the accelerator thinking it was the brake pedal? Interesting that drivers over 60 years of age were six times more likely to report the problem. None of this proves anything (yet) but I am still not convinced we should call for an immediate dogpile on Toyota.

It’s a little bit like the SWAirlines screwup with their failed inspections. Great company, significant misstep; can they rebound? I don’t like what happened and they must be held accountable but I like their chances. But I may be groveling repentantly before you in a year. We’ll see.

-Dr. EthixBiz

Dear Dr. EthixBiz: 

There’s more than a little irony in the timing of the publication of your new book, It’s About Excellence: Building Ethically Healthy Organizations, as the value of some Wall Street firms tumbles amid uncertainties about hidden liabilities for investment products bearing risks that few understand.  Have you understated your arguments for ethics?  Should your book more appropriately be titled; “It’s About Survival: Building Ethically Healthy Organizations”?  Does your new book address ethics for the investment banking and insurance industries?

-Philip Keillor

Dear Philip:

You certainly make a good point. Without some minimum level of trust and ethics we cannot conduct business. Most individuals and most organizations do operate ethically, most of the time. We would be utterly paralyzed in our human interactions if that wasn’t the case. The crooks take advantage of our assumption that they too will be honest and ethical. When they are well-dressed, respectable leaders, we are especially trusting and vulnerable. But we’ll only put up with it for so long. Persistently unethical businesses cannot survive over the long haul. Customers, investors, and good employees will go elsewhere; investigators, litigators, judges, and perhaps even jailors, will become a regular part of unethical organizations’ experiences.

The title of my book—It’s About Excellence—isn’t intended to imply that ethics is a kind of luxury item to get from good to great—rather than a foundational survival requirement. The contrast I intend is between ethics as “damage control”—i.e., organizations that only get interested in ethics as a response to bad things, as troubleshooting, as a negative, reactive strategy—and ethics as “mission control”—i.e., as a positive, holistic way of weaving core values into the organizational culture, as a strategy for pursuing success and excellence. The same concepts apply to investment banking and insurance companies as to manufacturers, retailers, sports franchises, churches, biotech firms, etc..

-Dr. EthixBiz

Dear Dr. EthixBiz
I work at the front desk of a hotel, and in this position I am often responsible for scheduling taxi rides for our guests. I have been approached by a number of drivers with an offer: If I call the driver directly for a long cab ride, he will give me a certain amount of cash, depending on the distance. Initially I considered this to be unethical, as the driver is probably not putting the job through dispatch, and could therefore be receiving a larger share of the lucrative pick-ups at the expense of the drivers who play by the rules.
I recently learned, however, that the dispatchers do not distribute the good calls equitably, as they have their “favorite” drivers and presumably are receiving a cut of the proceeds. Does this change the game? Also, I would be calling a driver whom I know has good service, punctuality, a clean car, etc., as opposed to playing the lottery through dispatch.
-UR

Dear UR
The ethical issues are primarily about honesty and fairness. One can imagine lots of different systems and traditions for calling taxis for customers (and for remunerating agents who arrange the rides), and if everyone knows and accepts the working “rules of the game” I’m not sure there is a problem.
I would first of all clarify those rules of the game. Ask around: what are the protocols? Are any of these actually written into law? (Violating a law raises the stakes). Perhaps customers, as well as competitors, should publish those working rules to be sure everyone understands. If there are rules but they are frequently flouted, it teaches contempt for a rule-ordered way of life. Better then to get rid of them and be transparent about the Darwinian way things are done.
Maybe this current way of operating invites abuse and even harm to some parties. Maybe it discriminates unfairly against some group. Maybe it could cause jealousy and conflict that could escalate to violence. Maybe, then, we should work together to devise a new set of rules (“regulations,” if need be). Could you take the lead in this effort or gather a small group of the stakeholders to invent and promote a new and better system?

-Dr. EthixBiz

Dear Dr. EthixBiz:

I am at a stand still on how to approach/address an issue in my office. I have a co-worker who has repeatedly taken my ideas and presented them as her own. In fact, just yesterday I overheard her swooping in on another one of my ideas. She didn’t see me because I was hidden where I was sitting. I am really upset because since she began here two months ago she has been encroaching on my responsibilities and ideas. I just can’t believe this is happening.

I don’t know that HR will appreciate a complaint about this, and our boss is like a wall to talk to. Any guidance or suggestions would greatly help. I apologize in advance if I don’t make much sense or if I haven’t provided enough context. I am just looking for a professional perspective on this. I can think of many solutions…but none that would be reflective of my character!

-KV

Dear KV-

The way I look at it is that you have three characters you may be able to work on:

Your co-worker is very wrong to do this.  Can you change her?  Can you gently persuade her?  Or confront her?  Can you get someone else to do it (colleague, boss, HR)? Sometimes this sort of theft of your ideas and initiatives is due to jealousy and even malice. Other times it is due more to incompetence and sloppiness—the thief simply doesn’t pay any attention to the source of their ideas (just as some people don’t recognize or say thanks” when kindnesses are done to them). You do have an advantage in that you’ve been there longer (she only two months, you say). Maybe a gentle but frank conversation along the lines of “we don’t do things that way around here” might work. If she just won’t change, can you distance yourself from the thief?  (work on another team, another department?  Another company?).

Your boss may be “like a wall to talk to” but how much have you tried to get through to him/her about this theft of your ideas?   Can anyone else maybe get through to your boss or help you out? (a sympathetic older colleague?). If it this goes on much longer you will have to try to talk with your boss (stone wall or not)—and then go to HR if your boss can’t or won’t resolve it.

Finally, let’s talk about you. You can’t control others but you can control yourself. You may just need to be more careful about sharing (and protecting) your ideas. With whom do you share them? How do you share them?  One of your best moves is to better document your creative ideas. Communicate them not just orally but on the record (e-mail, written memos). Brand them explicitly with your name, e.g., “The KV Marketing Plan.”  It is a little embarrassing to have to “self-promote” like this but failing to do so may leave you unnecessarily vulnerable to the office kleptomaniacs.

-Dr. EthxBiz

Dear Dr. EthixBiz:

My supervisor and I proposed a change to our team members which would shift some of my admin-related duties to the specialists in exchange for my helping the specialists with some of their responsibilities. Some of the specialists are experiencing large backlogs of work due to large volumes of work and not enough time to complete it. I proposed to my supervisor that I take a percentage (say 5 or 10%) of the backlog and help the specialists catch up during my low volume periods, and in return the specialists would do some of the traditional admin duties for themselves instead of relying on me.  She agreed to pilot this change.

But when we presented the proposal to the group and asked for feedback at the next staff meeting the idea didn’t sit well with the specialists.  One specialist remarked that it wasn’t appropriate for higher level employees to do lower level work.  I suspected that kind of attitude existed.

Do you agree agree that higher level/higher pay employees should be exempt from filing, copying, and go-phering tasks and that lower level/lower pay employees are the only appropriate means of getting those things accomplished?  I would like to think that we could view each other more equally in status and would be more willing to help each other.  So, how do you recommend that I approach this type of feedback at the next staff meeting?

-KG.

Dear KG:

The Southwest Airlines Way by Jody Hoffer Gittell is a thorough study of how Southwest Airlines beats all the competition, is profitable, and is always rated by its employees as a “best place to work” (and wins all customer awards as well).  How do they do it?  They emphasize teamwork and partnership.  Pilots will help walk through the cabin and pick up newspapers, flight attendants help ramp agents in a pinch, etc..  They choose to help each other rather than play the old “silo” and “turf” game that you describe.  SWA is the most highly unionized airline in the industry (85%) — but they have a culture of “team” — totally different than the old style at United Air, Ford Motors, etc, where unions and old guards defend their turf instead of beating the competition, helping each other, serving the customers (citizens) and owners (voters), and enjoying life.

People need to be reassured that their jobs are not being threatened of course but I am with you. It makes complete sense.  Your challenge is to figure out how best to sell the idea. How can you ensure that what is in the best interests of the company is also in alignment with what is in the best interests of the employees.

-Dr. EthixBiz

Dear Dr. EthixBiz:

During my years as a scout for a professional sports franchise, I worked with a fellow-employee who would try to manipulate everything to his own advantage. Everything for him was about promoting himself and his own interests. He tied himself to our boss (who had hired him) when it was in his own interests—but turned his back on him when the boss needed him most. He took credit for what were the accomplishments of others. Further, his actions regarding receipts, travel expenses, etc., made for a very uncomfortable atmosphere. What do you do with a situation like this, especially when you are in the high turnover, pressure cooker of pro sports?

-GB

Dear GB:

My first reaction is “what goes around, comes around.” Even if you don’t blow the whistle on the unethical colleague, he will eventually get caught and punished or fired, or abandoned by his colleagues when he needs them, or undermined by resentful, disrespectful employees he tries to supervise. It may not happen right away but his unethical patterns are not sustainable.

Keep in mind that if what your colleague is doing is illegal or a clear violation of organizational standards and policies (like the financial shenanigans you mention), you may be held liable for a “cover-up” if you don’t take action and report it. His mud may splatter on you. So you’ve got to do something. But what?

Apart from reactively confronting this guy about falsely claiming credit for the work of others—maybe you can proactively get vocal (or literate—write a note to the boss) in praising and giving credit to the real performers. In any case, it is almost always best to talk to another colleague or two—or your boss, if he or she is receptive—and figure out collaboratively how to approach the toxic colleague. Safer for you; wiser ideas likely to emerge.

More broadly: maybe you have to wait till the off-season to try to persuade management to take concrete, strategic steps to build a healthier culture that demands, enables, and rewards integrity and teamwork. Persuade them by holding up examples of toxic, self-destructive sports organizations (plenty of those around) and by showing them examples of winning, positive, value-embedded organizational cultures.

Maybe the unethical colleague can’t be reformed and has to go. And if he doesn’t go, for whatever reason, maybe you have to go and look for a better work environment.

-Dr. EthixBiz

Dear Dr. EthixBiz:

Our team was given the rare opportunity to interview and select our new manager.  The interviews were conducted during one of the busiest times of year but it was important to the team that we put a lot of effort into the process choosing the right candidate.  But when the interviews took place, one of the six candidates clearly had been fed the questions ahead of time by one of the members of our interview panel.  We did not share this with our existing boss because (a) we couldn’t prove it and (b) we felt that our input would be reviewed fairly due to the integrity of our boss.  We were wrong.  That candidate was hired even though they were recommended by only one of our seven interview panel members.

A ripple effect occurred from this hire.  First, the best candidate was not hired; we missed out on a much better fit. Second, our team now questions the integrity of our existing boss and division management. Third, in case of any future openings we won’t waste our time if it’s obvious that someone has already been chosen. The employees don’t feel as if their voice really matters. Fourth, loyalty to management has been tarnished and work standards and performance are not as high as a year ago.

-CM

Dear CM-

Obviously this process was not just managerially bungled but ethically wrong. It was bungled in that you didn’t get the best person hired and the result of the process made the whole team worse in attitude, culture, and performance. But we can say it was not just stupid but unethical because it lacked honesty and integrity, it profoundly disrespected you guys on the interview team, and it betrayed management’s fiduciary duty to make decisions in the best interests of company performance.

That part is easy to analyze. The hard part is how to repair the damage and to prevent future recurrence. Since the “wrong” candidate is now your new manager the situation is especially difficult. But anybody, including your new manager, should understand that “process” is important. The character of the “means” affects the quality of the “end.” Call it misunderstandings and lack of clarity rather than outright corruption if you need to — but work on reforming the future recruitment, interview, and hiring process to achieve clarity, objectivity, and consensus. Conflicts of interest and management assumptions and decisions should be disclosed if they want to avoid the outcome and ripple effect you described.

Can you (and a couple of your fellow interview team members) have an effective heart-to-heart conversation with the upper managers who asked you to serve on the interview team (and then went against your advice)? They need to understand how this was experienced and what the broader impact has been.

-Dr. EthixBiz

Dear Dr. EthixBiz:

With the massive failures on Wall Street this past month, I am wondering if the recently retired CEOs of failed institutions like AIG (Hank Greenburg), Citigroup (Sandy Weill), and Fannie Mae (Franklin Raines), to take only three examples, might be called on the carpet? And how about the Senate Banking Committee and the SEC? Weren’t they supposed to be watching out for us before financial catastrophe could happen?

-Frank H. (& many others in similar words)

Dear Frank & friends-

Dr. EthixBiz is with you on this. The first principle of professional ethics, going all the way back to the Hippocratic Oath, is “do no harm.” All of our ethical principles are ultimately about protecting people (and planet) from harm (physical, financial, reputational, relational, etc.). If someone builds a cosmetically beautiful but weak and dangerous house, then sells it to you without adequate disclosure and warning of its weakness and risk, takes your money and runs, and the house falls down on you . . . what do you think basic justice and fairness call for?

If the building inspectors all gave that house a “pass” with a lazy, inadequate inspection . . . what do you think basic justice and fairness call for? If the realtor sets up and facilitates the sale with eyes only on his/her sales commission and doesn’t protect you from harm . . . what do you think basic justice and fairness call for? And of course if the buyer recklessly, thoughtlessly enters such a contract . . . what is their “just desert”? Caveat emptor is the old Latin phrase, “let the buyer beware.” So the buyers of subprime mortgages and the investors in the related financial markets have some responsibility also.

But moral responsibility is partly a function of power. Those with more power have more responsibility. It is morally repugnant for the powerful on Wall Street or in DC now to be blaming the victim, blaming the poor, blaming the Community Reinvestment Act, etc.. Everybody has some responsibility, including the customer; but the powerful who invented these products and markets, and who knew or should have known that these products were uncontrollable and potentially disastrous, bear the greatest responsibility. The corporate malefactors who invented and/or promoted these toxic products should be subpoenaed to testify before Congress and explain how these products were used in their own corporate houses. This may eventually lead to criminal charges if for no other reason than these “leaders” did not carry out their fiduciary responsibilities to their shareholders, let alone the others in our economy who have paid the price as the houses started imploding. The regulators who were asleep at the wheel should be turned out of office. The fund managers who we trusted should watch as we move our investments to someone capable of taking better care of our savings.

Unfortunately, the guilty are unlikely to pay because they and their long time friends still control the system as a whole. What can we do? As citizens we can try to hold our representatives more accountable with our votes and communications. As customers and investors we can move our business to those who deserve it. And as business leaders we can reject the scam-artist tactics and irresponsible misleadership we have seen in favor of the way of treating our co-workers, customers, and business partners with respect and fairness and building our own businesses with pride and excellence. We all have to choose: what is my life, my career, my legacy going to be?

-Dr. EthxBiz

What About Hank? (continued) The exciting AIG story continues! The latest from “the House that Hank Greenberg Built” (AP, 9 Dec 2008) is that CEO Edward Liddy and his top 168 executive leaders, after previously announcing their “no salary increase, no bonus” plans, will supplement their basic salaries with special “retention payments” ranging from $92,500 to $4 million per executive. I guess it won’t be missed from the $150 billion they were just given from the US Treasury. Thirteen of these sacrificial servant leaders have also agreed to delay receipt of these payments until April 2009. Ethisphere should be preparing their ethics award plaques as we speak. A colleague described a dream he had (or was it a nightmare) in which he thought he saw CEO Liddy and his executive team thumbing their noses at a crowd of American taxpayers as they walked toward their limos — but as he moved closer he saw that it was not their thumb but another finger they were extending to send a message to the public.

Dear Dr. EthixBiz

I was promoted to a supervisory position at my company and am now responsible for managing a department with a dozen other employees. Several of these workers are significantly older than me and have worked at the company many years longer than I has. But I recently finished my MBA and was very effective in leading some recent projects.

Unfortunately three of the veterans (generally-viewed as high performers) under my supervision are having a bad attitude about my promotion. They are regularly, it seems, going behind my back to my boss (an old friend and golf partner of theirs) with complaints and questions. They are late or inattentive at staff meetings I call.

I have tried hard to be supportive of them and have gone out of my way to praise their work. I have asked them repeatedly to come to me with whatever issues they have. They just ignore me and complain to other workers about reporting to someone my age. What are the ethical—and managerial—issues here? What is your recommendation?

-Laura

Dear Laura:,

I’m so sorry about this situation. You have done just the right things so far in speaking directly to these three malcontents. It is an ethical problem because people—and the company itself—can be harmed and no one could wish this treatment for themselves. If it was reported on the news most public sentiment would be on your side.

So the first thing is to go to your boss and put it pretty strongly to him (stay calm but be firm) that he must cut these guys off the moment they want to talk about any of your departmental business concerns—in fact, he should put some distance between himself and them and tell them you are his choice to lead and they must get in line with a good attitude or get out, no matter what.

I wouldn’t hesitate to lay it on the line with the three guys again, one-on-one, and threaten them with a job demotion or transfer if you can. But tell them you don’t want to think that way. You want them to accept reality, get over their old attitudes, and join with you in making the department a success. If they don’t change (within a very short time frame) I would bust at least one of them (fire or transfer out). I might go over my boss’s head if he won’t support me. This is an impossible situation for a leader and it must be resolved quickly. Looking for another job is an option but why should you have to do it? You’re good Laura!

-Dr. EthixBiz

 

Dear Dr. EthixBiz:

I am the CEO of a small software company that I started six years ago with three other friends. We each own a 25% stake in the company but none of the other three partners have been involved in the management of the company for the past four years. We now have about 120 employees and are expecting to add about ten new positions each month for at least the next year.

Everything is going great but I am concerned about a romance that is obviously intensifying every month between our senior software engineer (who is married) and a brilliant young engineer who joined our firm (and his team) ten months ago. I worry about the possible distraction and impact on performances—and if this overheated relationship ever breaks up, what kind of problems could we have then?

We don’t have any official policy statements about workplace romances and I have mixed feelings in part because I met my own husband twenty-five years ago when he was my boss at my first job out of graduate school. Any ideas Dr. E?

-Joe B.

Dear Joe B:

While it may be true that some workplace romances (like yours) turned out well in the past—others certainly did not. So forget about your own experience long ago; that was then and this is now.

To the extent that this romance stays outside of the workplace you really have to leave it alone as voluntary activity by consenting adults (whether it offends our personal moral compass or not). But to the extent that this relationship affects—or threatens to seriously affect—your workplace, you need to take precautions. Here are five comments:

(1) does the actual behavior (actions, communication) in the workplace cross the line in your culture (some variation here among different companies of course) and become an unprofessional distraction or offense? If so, you need to speak with the actors and get them back in line. Keep your focus on actual, observable behavior.

(2) where is there (or could there be) any perceived or actual conflicts of interest? While the romance is positive, could there be favoritism of any kind? If the romance cools or ends could there be retaliation of any kind? What kind of authority does the senior engineer have over his team members (including his romantic interest)? This is where it must be clear to everyone concerned that job assignments, performance evaluations, compensation decisions and the like are handled in an objective way by managers without a conflict of interest. In a small company like yours, you will probably need to take an active role here.

(3) it is troubling that the senior engineer’s marriage appears to be in trouble. Hopefully it doesn’t indicate a deep character flaw—a willingness to break a major promise—that might show up in his work at some point. We don’t know the situation and are not going to get involved or assume anything one way or the other but we do file away this note.

(4) did the company (under your leadership) put undue stress on his marriage and life outside—and perhaps throw him into a tempting situation? People are free and responsible for their own choices, of course, but it is appropriate to be prodded by this situation to think about “work/life balance” in the company.

(5) for the future: this may well be the time to create a simple code of ethics that includes a line or two about maintaining professional behavior on the job. Some more detailed codes require employees to disclose (to their supervisors) any romantic relationships with subordinates.

-Dr. EthixBiz