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Allow Employees To Speak Out on Company Practices

November 1, 1998
Related Topics: Miscellaneous Legal Issues, Ethics, Featured Article
Imagine you're in court and you hear the words: "Please tell the jury, in your expert opinion, if the International Finance Co.'s actions in dismissing the plaintiff met contemporary business ethics standards of conduct."

Expert witnesses in business ethics? That's right. Lawyers for plaintiffs and defendants now are consulting and retaining business ethicists as they press claims and defend clients in increasingly complex business litigation.

Although courts and juries are arbiters of legal issues, difficult cases are rarely cut-and-dried. Therefore, each party tries to present its case in the most favorable light, particularly if significant monetary damages are at stake. Plaintiffs argue that company executives acted outrageously, far beyond any accepted standard of business behavior. Defendants try to show they did what any company would have done in similar circumstances. The problem is that the standard for good corporate behavior changes rapidly and may be very different in 1997 than it was three years -or even one year-earlier. A reading of the business pages of the newspaper proves that point daily.

As a result of this rapidly changing standard and intense scrutiny on corporate and individual behavior by the public, individual managers have to gauge not only whether their actions are legal, but whether they're ethical. Organizations now are vulnerable to attack if someone believes employees have violated commonly held principles and processes of ethical decision making.

What do you think of this scenario?
Consider the case of the fictional International Finance Co. (IFC). Norman Kent, a veteran 30-year sales manager, was by all accounts a talented but outspoken employee. He had been steadily promoted as IFC grew exponentially through a strategy of making acquisitions and creating or acquiring new products. At one point his name was touted as a candidate for president of the company, until the board of directors chose Christopher Heiss, an outsider from the consumer products industry.

Kent began to sense a gradual but definite shift in the corporate culture at IFC. Kent wasn't afraid to have his performance measured-he could deliver results and always had. But he was becoming increasingly irascible and vocal about some sales tactics and compensation incentives he didn't like, fearing IFC's customers were being sold new products they didn't need at prices they couldn't afford.

Kent was becoming vocal about some sales tactics and compensation incentives he didn't like, fearing IFC's customers were being sold products they didn't need.

One Friday morning, the vice president of human resources summoned Kent to his office for a meeting at which the chief operating officer was also present. "Norman, today is your last day at work," they told him. "We'd like you to leave immediately. We'll be in touch with you about your benefits." Kent was summarily paraded past his co-workers and subordinates, given a few minutes to collect his personal belongings and escorted to the parking lot.

IFC is forced to defend its actions.
Senior managers at IFC felt they were on firm legal ground in dismissing Kent. After all, Kent was an "at will" employee, and Heiss had the prerogative to choose his own executive team. Kent disagreed alleging not only that he was fired unfairly, but also that he was fired because IFC couldn't tolerate his criticism of the company's unethical sales practices. Now, instead of being in control, IFC was on the defensive and extremely vulnerable in the subsequent litigation for wrongful termination.

This incident need not have happened. Had President Heiss taken the time to assess the ethical culture of his new company (or to ask an ethics consultant to give him an objective evaluation), he would have come up with an ethics report card for the International Finance Co. that looked like this:

  1. Ethics mission statement: good
  2. Code of values: adequate
  3. Ethics committee: fair
  4. Ethics officer: company doesn't have one
  5. Ethics training: fair
  6. Ethics help line: company doesn't have one.

What's harder to measure, but more important than any of the above, is IFC's climate of openness. Were Norman Kent and other employees encouraged to challenge company practices and policies? How and where was such feedback channeled? What action was taken, and how was it communicated?

A culture that doesn't allow for ethical disagreements is at risk.
When a company doesn't have a mechanism for self-criticism or analysis, there's the danger that employees will be turned into robots, marching only to the corporate drummer, and that managers will become myopic and complacent. Even if the drummer is labeled "Ethics," a company isn't truly ethical if its culture, including its code of conduct, doesn't leave room for individual moral judgment.

Even if the corporate drummer is labeled "Ethics," a company isn't truly ethical if its culture, including its code of conduct, dosen't leave room for moral judgement.

In too many depositions and instances of litigation and arbitration, from government investigations and contract disputes to employment issues, it's clear that companies didn't allow critical dialogue. The emphasis too often is on "How do we stop this problem?" instead of "How did we let this happen?" Had President Heiss communicated early in his presidency that he respected free thinkers, encouraged honest and candid feedback, and challenged all IFC employees to help make the company better and stronger, the outcome might have been different.

In every organization, there must be a healthy balance between the authority of its moral policies and the autonomy of individual freedom. Yes, the International Finance Co. had some basic elements of an ethical infrastructure in place, such as an ethics mission statement and a code of values. But if the company had paid as much attention to listening to Kent and his fellow employees as it did to disseminating brochures and memos titled "Ethics," Heiss could have then produced his own expert witness at trial to state, "In my opinion, your honor, IFC acted prudently and in accordance with today's most thoughtful ethical standards."

Heiss had an opportunity as a new president to air out the company culture and make the "Norman Kents" of IFC part of his team to raise the standard of openness.

In retrospect, Heiss had an opportunity as a new president to air out the company culture and make the "Norman Kents" of IFC part of his team to raise the company's standards of excellence and openness. In doing so, he would not have needed to reinvent the ethics wheel. As ethicists who are expert witnesses in legal trials frequently explain, the tools of corporate ethics benchmarking, educational programming, and procedures for evaluating and auditing are widely available. Hundreds of companies have appointed a senior level Ethics Officer to develop and continually strengthen ethical organizational cultures. Any corporate executive who ignores contemporary standards of ethical conduct of business puts his or her company at risk.

Workforce, November 1997, Vol. 76, No. 11, pp. 73-76.

Recent Articles by Dawn-Marie Driscoll and Dr. W. Michael Hoffman

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