From Seasons Such As These

Reflections on Corporate Scandals and Core Values

“Poor naked wretches, whereso'er you are, That bide the pelting of this pitiless storm, How shall your houseless heads and unfed sides, Your loop'd and window'd raggedness, defend you From seasons such as these?”

     King Lear
     William Shakespeare
     Act iii, Scene iv, 28-32

Tragic heroes have a knack for delivering pertinent philosophical messages when wrought with despair. This passage, written four hundred years ago, expresses timeless conditions of human nature: a lapse of judgment; the tendency to err. These conditions gain more relevance daily in light of the corporate malfeasance plaguing recent headlines. Consider the past nine months: Enron, Andersen, WorldCom, Adelphia, Xerox, Tyco, ImClone, and Qwest. Even Merck, Johnson & Johnson, and now Citicorp have shown up on the reported offenders list. Alleged offenses span from the fabrication of billions of dollars of non-existent profit to extensive insider trading.

Corporate giants and family businesses alike are faced with a most basic challenge: How can this happen, and how can we keep this from happening to us? The answer goes beyond new laws and regulations. Long-term corporate vitality and ethical behavior demand a clear and well-established system of fundamental values that transcend time.

One well-known company’s core values are these:1
  • Honesty and integrity
  • Corporate social responsibility
  • Science-based innovation, not imitation
  • Unequivocal excellence in all aspects of the company
  • Profit, but profit from work that benefits humanity.

A great set of philosophies, which if followed should insulate the organization from scandalous behavior.

Core Values at Your Company

Could all of the employees at your company list your core values? Would there be a consensus? Are the values actually written down? Do you talk about them?

From our experience in over twenty-one years, we have seen companies spanning the whole spectrum of devotion to values. At worst, a company’s employees cannot recite the values at all, or fabricate guesses, or even give cynical answers. And, almost invariably, those businesses have suffered. On the other hand, we have seen corporate gems where employees clearly understand the value system. What is more, they believe in the values from top to bottom, and understand that the values are not to be compromised.

For example, a third generation, family-owned business in North Carolina supported core values that included (1) always doing what is best for the company and, yet, (2) never letting difficult business decisions create irreconcilable family conflicts. With this specific business, it turned out that what was best for this firm at the end of its third generation was that certain family members could not remain owners. The transition process went smoothly and without rancor, spawning a genuine celebration among two dozen historical owners.

But, great values must be lived by senior management. This can mean the difference between the life and death of an organization. Even under immense pressure, the most senior people must send the message that there can be no compromise with the company value system. Yet it does not always happen. The seemingly exemplary core values listed earlier are those of Merck – the same company who also recorded $12.4 billion in revenue that it never actually collected. An inspiring value system is merely words without total compliance.

Now consider the example of Anheuser-Busch, Inc. Perhaps you can remember the faces of August Busch, III and IV, respectively, on your television screen talking about the importance of heritage. Anheuser-Busch did not become a successful fourth generation company by accident. In fact, in the past decade, the Busch value code was severely tested when misbehavior between certain product managers and an advertising agency came to light. This company acted decisively and without hesitation. Although the most senior executive in charge was not aware of the disreputable actions, his employment was terminated; the violations happened “on his watch”. The declaration that nothing can soil the integrity of the Busch name was upheld despite the fact that the departed executive was a career employee with a successful track record and had been a personal confidant of August Busch, III.

A Few Simple Steps

A strong set of unwavering values can only help a corporation ensure that its members are on the same page. Determine what those values might be with respect to your particular firm. Ask your employees what they believe the values are. Write them down. Talk about them repeatedly and decide why they are important. Then perhaps compare them with the vision of the senior executives and board.

Remember that a chain is “only as strong as its weakest link”; bulk up your hiring standards and communicate them over and over again. Look at backgrounds more carefully and decide what candidates think makes the world a better place before you hire them. Finally, encourage your employees to give something back to the community—something besides work.2

Timeless Lessons

Although in agony, King Lear was astute to acknowledge his own negligence. Unfortunately, his fate was to be a tragic hero, doomed in the end. There seem to be more than a few individuals in headlining companies following the same path. Former Andersen CEO Joe Berardino went from presiding over accounting projects for the world’s largest corporations to perhaps being virtually banned from ever working in the field again. WorldCom’s former CFO, Scott Sullivan, treated $3.8 billion of ordinary operating expenses as assets, leading to the largest corporate bankruptcy in the history of the nation and is now under federal indictment. A recent Wall Street Journal story reported that former Enron CFO Andrew Fastow took pride in the value that at Enron, “we’ll rip your face off”. Really?

With corporate America in a “season such as this”, timeless lessons can be learned. History does repeat itself, even for those who claim that these lessons no longer apply. Those at the top, from whom more is expected, must be accountable for the tone of the group. Just as is the case with literary tragic figures, the higher the pedestal before the demise, the further and harder the fall.

A company striving for lasting success must not depend upon heroes, but a transcending value system that not only guards but permeates the entire organization through all phases of organizational history. The value elements themselves, both tangible and not, weave the threads that secure the organization at its most fundamental level. Never underestimate the ability of the tiniest thread in the company tapestry. Keep all loose ends tied tightly and remember the core values.

1Collins, James C. , and Jerry Porras. Built to Last. New York: HarperBusiness, 1994. 69-75.

2 A core value at Norelli & Company is to keep balance in your life. One’s ability to absorb the surrounding world and bring that knowledge back to the desk is priceless.

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