April 30, 2009

Can Web 2.0 rekindle America’s love affair with the automobile?

As many of you know I made the decision to go back to school this year and have been attending an extended learning program at MIT Sloan School of Business. I have my quarterly meeting in Cambridge coming up and was reading through my assigned case studies this weekend. One of the readings concerned a supply chain situation at Ford that was taken from events earlier this decade. I don’t know if the professor was looking to evoke this line of thinking, but I started wondering if the automobile world could transform itself and convert to the Dell distribution model. So while this is outside the realm of my normal blog topics I am hoping to leverage this forum to get some quick feedback for this zany idea.

The Dell Direct Model has been very successful from a supply chain and margin contribution perspective. Dell Direct is a business model that eliminates the traditional distribution channel and goes directly to the consumer. Traditionally, as is in the case of Ford and others, there is a supply chain that supports the manufacturer (the “brand”); the finished goods are shipped to a variety of distribution outlets and the consumer selects a branded product from one or more of these outlets.

Dell broke this model by using a Web 2.0 enabled business model that removed the traditional hardware distributors and opened a line of communication directly with their customers. They also ensured/marketed that the computers they sold would be customized for each client and delivered to their home. They built a website with a well defined on-line configurator and allowed the consumer to craft the PC of their choice.

Stick with me – I know this may sound crazy, but with the automobile industry in chaos-wouldn’t this model work for cars just as it has for computers?

One of the many problems with the auto industry is over supply. In 2008 manufacturers had the capacity to make 17 million cars annually to support a 10 million domestic car demand. The current cost-to-market structure and low margin of profit per vehicle has collectively rendered auto company business plans not successful at the 10 million vehicles sold rate. Regrettably, the industry has continued to blindly build significantly more than 10 million cars, go deeper in debt and is now financially and credibility bankrupt.

By changing their go-to-market strategy Dell proved they could derive stronger margins, control their inventory costs and nurture a very satisfied consumer base. So what would this mean for the car buying consumer? First the buying experience would change dramatically. Showrooms would be totally reconfigured with more interactive displays and computer simulations but the overall footprint would be reduced dramatically. Sure the auto dealers would need to have a few, very few, new models in stock for the person who just wanted a good, better or best model and wanted a new car today. There would still be used cars, but for a new car the majority of us would configure our new car, do the paperwork and have it arrive 3-4 weeks later. Or, we might never visit a showroom and simply configure and buy the car on-line.

If you let your mind wander a bit and if you have ever configured a Dell system you can begin to think about how this buying experience might work. Packages and promotions would be similar. Like a free upgrade to a XM/Sirius radio instead of an upgrade to a DVD Burner from a standard CD drive. How about custom wheels in lieu of an extended battery? Door to door shipping is a premium option, but a cost-efficient pick up area near a rail distribution hub could provide the lowest shipping cost option.

The advantages of this system could be remarkable. The cost to build and maintain (just think of the property tax savings in some states) a dealership would be significantly reduced. Even rural communities would be better supported with this model. While the assembly-line process would need to evolve to ensure overall vehicle costs do not rise dramatically, the advantage of knowing your exact demand would eliminate excess inventory and floor-plan costs would be dramatically reduced. Because manufacturers are primarily shipping product on demand it is likely transportation costs would improve – the carbon footprint would also be reduced.

I can imagine unique designer packages for interiors that are truly unique. Resale values might hurt downstream with some poor choices, but why not a Martha Stewart, NASCAR, or NCAA interior of your choice? All would add license opportunities and potential additional revenue. Buying online also provides click through revenue from alternative financing sources or custom items from tailpipe extensions to HD-DVD systems made for the vehicle, but not available from the manufacturer.

More importantly, just like Dell, the auto manufacturer would begin to know what motivates the consumer and cars would evolve just as PCs have to meet the usage demands of the consumer. Lower R&D costs, fewer miscalculations (can anyone say Pontiac) and an overall improved track record for consumer loyalty. Can you imagine blogs and twittering by designers, engineers and quality assurance folk who were sincerely interested in market feedback?

There are a number of specific business planning details I will need to construct before going to MIT next week, but help me out with a little informal survey…would you buy a car using a system like this? If not, why not?

THIS JUST IN -- Chrysler files for Chapter 11 (http://tinyurl.com/d3f5kf) -- are they better off dead or alive??

March 24, 2009

Say on Pay

My wife, who I consider a good lawyer and I totally disagree on the way the public outcry has been unleashed against some executives at AIG and other organizations. She holds to the belief that this “bonus money” is her tax dollars and these people don’t deserve to be paid with her money. I get the frustration, but my point is why does this “say on pay” deserve to be different than an individual shareholder’s opportunity to control the way corporations incentivize and pay their executives? In my view it doesn’t.

I have never been in favor of say on pay by shareholders or God forbid the Government. Shareholders have the right to make their feelings heard but most are not qualified to make decisions for the organization. Shareholder say on pay should remain a vote with their feet or their proxy statements. In my last installment I said that boards have to step up, dig in and bring some collective sensibility to this process. I think it is also time for shareholders to step up, dig in and remove some board members. Some of these directors also need to be thanked for their meritorious service and sent to permanent retirement not just shuffled to the next board.

I believe that the world has to hold Board of Directors to an increased level of accountability. Boards (not shareholders) have the obligation to understand what it takes to hire and incentivize key executives. Boards (not shareholders) are empowered to set reasonable and appropriate incentive targets – regardless of the number of trailing zeros. We have a governance system that has worked for more than 100 years, but greed and lack of accountability has diluted its value. And what is this silly tax idea??? Simply stated, boards must return to accountability for executive compensation so that is ensures that all the organization’s stakeholders get rewarded.

So what do you think government’s or a shareholder's role should be on “say on pay”?

March 22, 2009


I have tried to stay on the sidelines because a number of people are blogging about the AIG bonus issue, but I can’t contain myself any longer. This is likely to be part one of a three or four part series, because this issue, in my opinion, is much larger than just the public’s reaction to these bonus payments.

First, no one that earned and received these bonuses at AIG is guilty of anything. They did their job and deserved to be rewarded for their efforts based on contractual agreements. So I am not only saddened but ashamed of the blame game behavior of both the liberal and conservative news media and a number of very ignorant protestors camping out on AIG executive’s lawns.

If you have never worked in a variable compensation model it is impossible to understand the pressure of carrying a quota or delivering the next great source of new revenue. Therefore, targeting these very blue collar individuals to interview on TV just makes the situation worse.

So, if these executives aren’t to blame then who is? It is a long list – the senior executives who built the compensation models, followed by the compensation committee and the board of directors for AIG that approved them. Next in line is the US Government for not being proactive in evaluating and better adjusting or confirming these bonuses when AIG first was asking for money. Congress comes next for not reading Dodd’s language – which expressly allows for the bonuses to be paid. Finally this is just another faux pax by the Obama administration. The President’s Chief of Staff needs to clean house of their PR and protocol staff because their actions and mistakes in the first 60 days of this administration are comical to the point of being criminal.

Do I think that all these multi-million dollar bonuses that a number of companies that took bailout money are fair or justified, no I don’t. But that isn’t the question on the table. If these payments were being decided in a court of law, not a court of public opinion, there isn’t a case to be made that these should not be paid. The Constitution, if it made it to the Supremes would also support payment.

The real conversation should be about Board accountability and “Say on Pay.” For the moment I am going to concentrate on accountability and will save comments on say on pay until my next installment.

President Obama’s reaction to AIG bonus payments isn’t the first time has echoed the public’s outrage. Most American’s felt pretty much the same way when executives on Wall Street and executives from bailed out banks received significant year-end bonuses and other compensations. The President followed up with a “close the barn doors after the cows are in the pasture” $500,000 salary freeze for executives of organizations that take new Federal funds. If I am to believe CNN the average American thinks a $500,000 salary package is unbelievable – almost immoral.

So how much is a CEO worth? In this silly quarter to quarter world we live in they seem to be worth a lot for what seems to be very little sustained performance. If there are “criminals” in this process it is the compensation committee chairs and boards that approve these crazy compensation plans. Incentive compensation is all about moving the needle. If as a CEO I can show growth, profitability, new market expansion, or ?? to improve my company’s share value and sustainability I am worth a lot, and no one should complain because by moving the needle every stakeholder of the company is getting rewarded. But let’s get serious, the transactions and deal sizes have gotten crazy and justification of paying a small “percentage” of the deal is ludicrous. Don’t misunderstand me, I get hard work, creativity and value and don’t balk at million dollar plus bonuses – but $20 million? Boards have to step up, dig in and bring some collective sensibility to this process.

What do you think?

March 18, 2009

Blowing the Whistle Just Got Easier

With the passage of the American Recovery and Reinvestment Act of 2009 (ARRA), commonly known as the Stimulus Act, $500,000,000,000 (sorry I just wanted to type all those zeros) is now being moved into employers across a wide spectrum of industries to stimulate our economy.

If you work for or run an organization that is in defense, education, energy, environmental cleanup, government technology, healthcare, housing, hunger assistance, infrastructure projects, scientific research or transportation you are first in line for these funds.

That is the good news. The bad news is that within the Act is the McCaskill amendment which significantly broadens the scope of whistleblowing and puts EVERY EMPLOYER at serious risk.

The Amendment to the Act does not cover Federal Employees (they have the Whistleblower Protection Act), but is extended to all private employers and state and local governments, including their contractors and subcontractors, who receive Stimulus funds. This means if I get ARRA funds and I hire you as my contractor, and you hire a sub-contractor(s) to complete the project – every organization in this chain is accountable to the McCaskill amendment.

The Act significantly expands the whistleblowing provisions defined under SOX includes “internal disclosures, including disclosures made by employees in the ordinary course of performing their job duties.” Attorneys Allen Roberts and Frank Morris of EpsteinBeckerGreen did a great job of detailing this act and I encourage you to review their whitepaper.

I hope you are listening. This means that not only should every employer have a methodology to support anonymous reporting, but they need a methodology to document, classify, escalate and otherwise track issues brought forward which would be considered relevant information through an “open door policy.” Here are the “violation types” or talk tracks specifically identified:

  • Gross mismanagement of an agency contract or grant relating to Stimulus funds,
  • Gross waste of Stimulus funds,
  • Substantial and specific danger to public health or safety related to the implementation or use of Stimulus funds,
  • Abuse of authority related to the implementation or use of Stimulus funds, or
  • Violation of law, rule, or regulation related to an agency contract or grant awarded or issued to Stimulus funds.

This law puts the responsibility firmly on the employer as there does not need to be a preponderance of evidence of retaliation, in fact it can be circumstantial. Therefore, the employers should implement and consistently follow procedures that document their actions during and post receipt of any disclosure.

Should employers retaliate against the "whistleblower," the action is swift and significant. The Office of the Inspector General is bound by the Act to review and make a determination within 30 days of the validity of the claim. If the claim is deemed valid, the Act requires the IG’s office to make a determination within 180 days. The complainant is entitled to reinstatement, back pay, compensatory damages, attorneys’ fees, and if warranted exemplary damages. If it goes to trial the complainant is entitled to a jury trial and the Act specifically removes any employer right to arbitration.

Finally there is no preemption to this Act, so States have the option to add to this Act if they feel it “necessary.” So over time this could be become very messy.

The bad news isn’t over yet. Everyone is waiting for Health and Human Services to promulgate the Act’s requirements for changes in HIPAA privacy regulations. When they do I will let you know the risks and requirements.

Full Disclosure – EthicsPoint is a market leader in Hotline/Helpline & Issue Management market. We will no doubt benefit from the passage of this legislation, but my intent is not to encourage or scare you into purchasing products and services from our company. My concern is one of big government, that in my opinion, just got a lot bigger and the downstream risks to smaller private employers in the Stimulus Act are significant.

March 9, 2009

Contracts and Covenants

Yesterday morning I honored my daughter’s wishes and attended the performance of the church bell choir she to which she belongs and loves. At the end of the week I didn’t have any intention of attending services but took one for the team, letting my wife and other daughter stay home to work and study, to hear our oldest daughter play the bells.

When I looked at the bulletin I saw that the homily was to be delivered by a Franciscan Monk. I can’t say that I was excited about the prospect. A number of years ago I spent some time in study of the Franciscan Order hoping to improve the work / family balance in my life. I sincerely admire their Order and mission of personal peace and harmony with the world around us. But after taking a vow of silence and spending two days in a monastery setting without speaking a word I knew that I am not cut out for the Franciscan lifestyle.

Much to my surprise and delight the homily was not only topical and insightful but also uplifting. The jist of his message was examining the difference between the “Contract God” we imagine and the “Covenant God” that spoke to Abraham.

This caused me to think about my own management style and the way in which I deal with people and provide stewardship for my family. Without a doubt I live a contract driven life. I will give or reward you with this, if you are successful in providing that. Get good grades, get a car. Drive revenue and get a promotion, more pay and more recognition. Work hard, save money to your 401K, be prudent with your investments and you will be rewarded with monetary security and someday retirement – oops.

What happened to my contract? Given the recent sub-prime and other implosions the global economy my 401K, as I was reminded during the homily, has been reduced to a 200 1/2K.

The homily went on to describe God’s covenant relationship with Abraham. This is a great story regardless of your religious persuasion. Imagine being a 99 year old guy that God taps on the shoulder and says “time to get started.” But this “mission” wasn’t (according to the Friar’s homily interpretation) a contract to go and build a nation, but rather a covenant of unconditional trust, expectation and hope.

While I it is unlikely I will shift completely away from my contract roots, I hope that I can translate some of this teaching into the way I interact and support my team and family. I have always strived to deliver integrity in my “contracts.” During these uncertain times, I want to find a fitting level of integrity as I set clear expectations, trust in the commitment and abilities of the people we have chosen and trained, and inspire hope for the future.

March 2, 2009

The SEC Sucks

When retiree Phyllis Molchatsky filed suit in NY against the SEC in December 2008 for failing to protect investors I just looked at it as going after the deepest pockets. But after watching the 60 Minute segment on Sunday night I think she may be justified in pointing the blame their direction.

In the CBS interview, Harry Markopolos was asked how many times he sent materials to the SEC. Markopolos calmly responded, "May 2000. October 2001. October, November, and December of 2005. Then again June 2007. And finally April 2008. So five separate SEC submissions."

Markopolos is not superman, he is a 52 year-old accountant who said he was able to see that something was wrong in minutes and it only took him 2 hours of study to prove it. He went on to say that the SEC was full of lawyers who were great at scrutinizing documents, but were not trained or capable of identifying fraud.

A few weeks ago I was watching the news where a congressman asked if they could bring the regulators associated with the issue into the hearing room. When asked why, he responded because “I want to tell them they suck at their job!”

It seems that the SEC does suck at its job. There is no shortage of litigation around the Madoff matter. My question is can and should the SEC and its regulators be held directly liable for failing to protect shareholders?

February 26, 2009

You can’t make this stuff up…

A friend of mine sent me this link tonight (http://www.truthout.org/022409J) and it is so sad it is almost comical. What a pathetic politically correct world in which we live. If the implications of this are factual then God help us all.

February 24, 2009

Blowing the Whistle

Sorry that I have been away for so long, it isn’t for the lack of desire – too many responsibilities with the year-end, shareholder meeting and 2009 growth demands.

This weekend I began to prepare for my participation in the “Great Debate” sponsored by the Oregon Independent College Foundation (OICF). It seemed to be the appropriate Blog subject and I was incredibly lucid in my thinking, but following a system crash I had to redo this blog post; and it now comes with an epiphany – if Microsoft made cars we would walk to work three or four times a week.

As I now sit here on Monday night, after a very long day of work and a session with my personal trainer who seems to just live to kick my ass I am far less lyrical.

In an earlier post I mentioned my involvement with the University of Arizona and the Eller Ethics Bowl. I find my time with these very bright and inspired students to invigorate my thinking and challenge me to be a better mentor.

The OICF Ethics Bowl is an academic competition that stresses the importance of ethics in the workplace, combined with leadership, decision making, and interpersonal relations. So aside from being a judge on Saturday, this Friday I will be on stage with 7 other CEO's in Oregon, judged by a student panel from the OICF's member schools debating a current ethical dilemma.
The topic is all too real. A senior bank executive, who is not part of the lending operations, discusses the impending risk they see based on the bank’s sub-prime policy with the bank’s CEO. The CEO tells the executive they have always been a team player, but have also always been too risk adverse. The CEO explains that the bank had hedged against the sub-prime risk and that while they appreciate this concern; a more immediate concern is the less than stellar growth numbers the executive’s division is reporting. The executive goes home and tells their spouse that they are conflicted at work. The spouse’s response is “how do we pay our bills and keep our kids in private school if you lose your job?”

The question for the panel is basically “what’s a girl to do…” This scenario can be played a dozen different ways. A single mom sees her boss doing something wrong, but how do you pay the rent if you are retaliated against. This is a real problem and while I can discuss the how and why surrounding the importance of having the right culture to report misconduct it doesn’t answer the question.

In this case, a person raised their hand, expressed an opinion and was told there is no risk and you better get your personal house in order if you keep pushing this agenda.
However, I can also turn the tables. People at Peanut Corporation of America must have seen and felt the same way. They didn’t want to lose their jobs, but by the last week in January, the number of tainted peanut butter salmonella cases had reached 600, at least nine people are dead and PCA is bankrupt.

So I ask you – how could this executive be more effective in exposing this risk? Or, should they remain silent?

January 28, 2009

How much risk is in your supply chain?

As most of you know I believe that the downstream risks buried in supply chains represent the next big frontier in risk mitigation. Not vetting a vendor sufficiently or creating a methodology to measure, monitor and collaborate with the organizations that comprise your supply chain sets your company up for problems.

Here are a couple of great examples.

Corpedia Sues LRN. With full disclosure, LRN is a valued partner of EthicsPoint and I have the utmost respect for my friend, Dov Seidman, their Founder and CEO.

On December 28, Corpedia, a competitor of LRN, filed a lawsuit against LRN for trademark infringement and unfair competition for LRN’s use of Corpedia as a Google® key word search term. Over the course of the past few years I have had several of EthicsPoint’s competitors use our trademarked name for this purpose, and usually a simple phone call or a cease and desist letter resolved the situation. This is an unfortunate event for those of us in the ethics business, regardless of who’s right or wrong; we shouldn’t have to resort to lawsuits.

Although I am unaware of any dialog between Corpedia and LRN regarding this matter, I am familiar with the fact that very often third-party web optimization firms are engaged to direct this type of marketing effort. The decisions that are made about what words to buy, how to sponsor the links, how to structure the ads, etc. is left to the outsourced firm and the only measurement by the client is the number of leads generated from the activities.

A good friend of mine, Patrick Kuhse, weaves a great a story about why people and organizations get into trouble. Patrick speaks from experience: he is a convicted white-collar felon having spent four years in a Federal Prison. Before serving his time, he was an international fugitive from justice which landed him, with some help from Interpol, in a Costa Rican prison for a while too. Today, Patrick is an international speaker on the topic of business ethics and critical thinking skills. He also dedicates a lot of his time talking to college students about not making some of the same mistakes he did. Patrick has summed these up into his “8 Critical Thinking Errors that can Wreck a Career.” One of these is titled Seeming Unimportant Decisions.

Again, without being knowledgeable about the specifics of the Corpedia/LRN case, I can foresee this being another example of why organizations need to better manage and audit vendors and supply chain; as the organization is almost always responsible for the actions of their vendors and supply chain. Could a seemingly unimportant decision not to review the key search words being selected have led to a multi-million dollar lawsuit – not to mention the business distraction this litigation undoubtedly generates?

The Peanut Butter Nightmare. Earlier this month, Peanut Corporation of America (PCA), a peanut processing company and maker of peanut butter for bulk distribution to institutions, food service industries, and private label food companies, announced a voluntary recall because their peanut butter was potentially contaminated with Salmonella. PCA's products aren't sold to grocery stores. PCA only sells peanut butter to institutions and food manufacturers. So this potentially dangerous peanut butter is now in candy, cookies, ice cream, etc. PCA is a part of the supply chain for General Mills, Clif Bar, Kroger, Kellogg and 81 other companies – including a number of nursing home food service facilities.

Consequently there have been a number of deaths attributed to this matter and hundreds of people reported ill. The FDA has identified four different strains of salmonella in the plant and said “the Peanut Corp. of America plant had shipped products that the company's own initial tests found to be positive for salmonella. They retested and got a negative reading.”

Without question this is an unfortunate situation and it is unlikely that this will end well for any of the parties involved. The shelf life of peanut butter and the mixing and intermingling of the product in processed foods truly makes this a nightmare.

My question for you – How do you know that your supply chain is acting ethically?”

January 19, 2009

Turning Point in History?

Ronald Regan and Abraham Lincoln are my two favorite presidents. Both faced very difficult times in our country’s history, and both responded with personal strength and conviction to shape and dramatically change in our world. Both were masters of compromise and communication. What is remarkable about these great leaders is that neither of them is recognized for bringing a “big IQ” to the Office.

One of the quotes I like and feature on this blog is from Ronald Reagan. Regan said, “There are no easy answers, but there are simple answers. We must have the courage to do what we know is morally right.”

Tomorrow is a big day for our nation and a turning point in our history. Not because of the color of Mr. Obama’s skin, but because of the way our nation is responding to its new leader, the promise of a new direction and a new hope for our future.

As I think about the problems our country faces today and the important role our new president will play, I am prayerful that Mr. Obama will have the moral courage to do what is right for the country. Some of the early decisions he has made give me great hope, others frankly give me pause. He has selected a number of individuals for his cabinet who are not only bright, but are free thinkers. Can he control the conversation and will he have the conviction to lead despite what is politically expedient? How important do you think Mr. Obama’s first 100 days in office will be?

January 13, 2009

My Latest Ethical Dilemma

Late in 2008, I bought a new car and, because I’m such a wonderful father, I traded my old car with my youngest daughter. This meant she got to replace her 2001 Hyundai (worth only a few thousand dollars) with my old 2004 Mercedes, which she agreed was an excellent deal. Not wanting to list and sell her old car myself, I found a broker through my network of friends. He agreed to sell the car for a modest fee. We listed the car and within a couple of months the car was sold. To date, I have yet to receive any money and we soon came to realize that we, along with several other people in Portland, had been taken by a broker who had skipped town.

Right now, I own – e.g. have the title in my possession - the Hyundai. A very nice person, to whom I have only spoken briefly on the phone, paid cash to the broker for this car and now has possession of it, but no title. The police tell me that if I so desire, I can claim the car a stolen and they will arrest this person and hopefully get my car back. My insurance company tells me that they consider the car stolen as well. But they can’t process any claim I might have until the police are involved.

About a month ago, the court appointed attorneys for the broker told us that there was a surety bond in place and that when all the claims were processed we would see some proceeds from the bond. Yesterday I got a registered letter saying that the claims amounted to just over $620,000 and there was a surety bond in place in the amount of $40,000. So my math says I will get about $6.00 for every $1,000 my car was worth. Of course there are likely to be some attorney fees involved so my $30.00 windfall may go down.

Here is my dilemma. The person who bought my car did so in good faith. He paid cash for the vehicle (and, in my opinion, paid a premium price). If I file a claim for this money, I will be forced to call him a thief and send the police or a private towing company to reclaim my car. I would then get the car back to clean up and re-sell and he gets nothing. I haven’t checked to see if there is any tax benefit from me taking this as a loss, but if I do, how do I deal with the title of this car – for which, by the way, I am still paying the insurance on?

Candidly, I won’t miss a meal if I just write this off, but there doesn’t seem to be any roadmap as to how to make this a win-win.

What would you do in my place?
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January 7, 2009

Integrity vs. Ethics

日光 ❁卍❁ 丸Image by gullevek via FlickrThe first thing you should know is that I actually hate the use of the word “ethics”.
Over the next few months I plan to write about things that I believe are shaping our industry and influencing the way in which organizations address ethics and compliance. Despite being the CEO of a company called EthicsPoint, the first thing you should know is that I actually hate the use of the word “ethics” when applied to the business world. The problem is that, in its purest form, a person or organization is considered either ethical or unethical based on their actions. But as you and I know, life doesn’t work like that.

Illustrative Case: What to Do About Child Labor?

Let me give you an example…Since 2003, I have had the pleasure to work with Paul Melendez at the University of Arizona, where they hold a world-class Ethics Bowl in the fall of each year. More than 20 universities from around the world send teams of two extremely bright and engaged students to share their solution to a “hypothetical” ethical dilemma. Every year that I have judged this event there are always one or two groups of students who take the ethical high-road. One year the case presented involved a company’s foreign country sub-contractor using child labor to harvest the raw materials that supplied 75% of the company’s revenue. Unfortunately, child labor is a common practice in this country and one that is difficult to control. One group of students recommended to immediately stop using the contractor and find another geographic source for the raw material. Their solution was clearly the “ethical bright-line”, but enacting their solution would in all likelihood bankrupt the organization in a matter of weeks.

The Better Way: Finding a Creative Business Solution of High Integrity.
Instead of “ethics,” I prefer to use the term “integrity”. In the example above it is easy to see what the righteous solution might be, but we do not live in a perfect world and often are unable to instantly mitigate a terrible situation. In this case the best solution is to invest in education and governance around the supply chain’s labor policies; knowing that while you work to correct the problem your profits will be affected and some child labor will undoubtedly be used. Frankly a business decision of high integrity, like investing to change a paradigm and accepting the fact child labor is still in use, could be considered by an “outsider” to be unethical.

Building a sustainable ethical culture takes time and requires difficult decisions to be made as well as learning from our mistakes.
When business leaders are faced with tough decisions that affect people’s livelihood or the sustainability of a business’ franchise the best possible response is often likely to be “baby steps” of high integrity that begin to reshape the values of the organization. Unfortunately, because we live in a two-quarter-at-most-world, a lot of great companies initially find themselves in the penalty box for making these kinds of long-term decisions.

(If you would like to see how the issue of child labor in developing countries is being addressed, I encourage you to visit the International Cocoa Initiative’s website. )

That’s all for now – what are your thoughts?
Do you agree that we need to make a distinction between “ethics” and “integrity” or do you feel I’m off base? Should I have judged the example above differently – was the ethical high road the right one to take? Let me know by posting or sending me an email directly.

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January 1, 2009

We Need to Talk

Welcome to my blog. This is my first blog…ever! The purpose of my writing here is to offer some insight into what I believe is driving my business, our industry, and the regulatory environments in which we operate. I begin this dialog with more than 20 years of experience as a CE0, Board member and technology change agent in hopes of starting a passionate dialog about the issues we face. My goal is to generate some creative ideas that support innovation and operational success. I invite you to consider the issues I will present and respond to this blog – I want to hear what you have to say!

Those who know me will say that I always speak my mind and, although this tends to make my legal team a little nervous, I wouldn’t change this quality about myself. Anyway, I generally have an opinion on things - okay, okay, I have a strong opinion on everything! - and I'd like to share it here. However, for this blog to be of value it must be honest and interactive. It must be bold. I assure you I will be honest regardless of how irreverent it may seem, but the interaction depends on you.

For now, I leave you with a thought of what’s to come: my vision for the next couple of years is that supply chain management, from a governance, risk and compliance (GRC) perspective, is one of the most important issues to be addressed. I am hopeful we will talk a great deal about it here and that we can share examples of ways to improve the process.
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About Me

David Childers
of EthicsPoint

View David Childer's profile on LinkedIn contact david Email Me


Favorite Quotes:

Ronald Reagan
There are no easy answers, but there are simple answers. We must have the courage to do what we know is morally right.

John Quincy Adams
If your actions inspire others to dream more, learn more, do more and become more, you are a leader.

We are what we repeatedly do. Excellence, therefore, is not an act but a habit.

Ray Kroc
The quality of a leader is reflected in the standards they set for themselves.

John Maxwell
The first step to leadership is servanthood.