Archive for the ‘Issues and Incidents’ Category

 

Holding Fast to Principles—Costs and Benefits

March 21st, 2014
Jim Thomas

For the individual, holding fast to a principle, conviction, standard, or value often carries both costs and benefits. It can cost one a friend, a sale, a contract, a client, a patient, a job, a promotion.  On the other hand, steadfast integrity preserves the one asset no one no one can afford to lose—one’s self respect.

Consider this incident from the 1970s at the Environmental Protection Agency. [Names are disguised to protect confidentiality.]The EPA was in the market for a new scientific instrument capable of measuring light and chemicals in water. John Doe was an EPA Area Director with responsibility for reviewing proposals submitted by vendors competing for the contract.

As it turned out, a company in Washington DC, owned by A. Jones, Doe’s long-term friend and professional colleague, was among the competitors. Their friendship dated back to Johns Hopkins University, where the two men shared housing while working on their PH.ds. Their friendship and professional contacts continued across the years.

When Jones’s company submitted its instrumentation proposal, EPA researchers found it contained a minor flaw. It failed to measure photosynthesis in water to the required levels. Doe had to make the final judgment rejecting it.  He received a phone call from Jones. Invoking their long-standing friendship,

The contractor appealed to Doe to approve his instrumentation. In addition he reminded Doe they were dealing with public money only, not each other’s private funds, and he, Jones, “needed some of it.”

Doe declined to budge. Said he; “I would have helped my friend any way I could. But the standards for measurement were the standards. The instruments either met them or it did not. It was a close call, but Jones’s instrument failed the test.  I was at peace with the decision.”

From that day forward, Doe never heard from Jones. When their paths crossed at professional conferences and meetings, Jones refused to speak and broke all further contact with his old friend.

Doe lost a friend but kept his self-respect. Said writer Brad Blanshard:

What above all else puts power into our ideals, what sets the drive wheels of the  moral engine in motion, is not a schedule of dogmas of first and last things, but the picture in one’s mind of something one has to be if he is to keep his self respect. It is the most powerful of motives, for it is what no one can afford to lose.

 

 

THE SMELL TEST: PROVEN TOOL FOR PERFORMANCE WITH INTEGRITY

September 5th, 2013
Jim Thomas

David Ratcliff, former President and CEO of the Southern Company, was the speaker at a breakfast meeting in Atlanta in 2008. The title of his talk was “The Integrity Problem in Corporate America.” In his remarks, he encouraged use of the smell test. Speaking metaphorically, he said it was his experience that when one smells smoke somewhere something is burning. Hence, said he, apply the smell test.

 Ratcliff is not alone. Professionals, managers,  and others assess questionable events by asking, “Will it pass the smell test?”

 The smell test is a useful tool for encouraging performance with integrity. You will find numerous definitions of it. At Alliance for Integrity, LLC we say it consists of certain simple but piercing interrogatories. One directs them at circumstances and  transactions that on the surface appear  inappropriate, however slight. Or in Mr. Ratcliff”s words, “Do we see or smell smoke?”

The smell test inquiries:

  •  How would it play if we read an account of it in print or broadcast media?
  • How would we feel in describing the matter to a disinterested party, spouse, or friend?
  • Laws, rules, regulations, policies aside—does it violate our general concepts of right or good?
  • Is fairness diminished?
  • What is the potential, if any, of causing harm?
  • Does the rule of unintended consequences have application?
  • Does the matter in question withstand moral scrutiny?

 A major strength of the smell test it that it activates how others judge the situation as well as  the parties involved.

A case in point:

 On August 11, the Atlanta Journal-Constitution published a front page story regarding  Fulton County Tax Commissioner, Arthur Ferdinand, who collected tax-lien fees on top of his substantial salary. The paper reported the Commissioner had found a way to collect a 50-cent fee on each and every paid-off lien, thereby adding tens of thousands of dollar to an annual salary of $368,000, the highest of any public official in the State of Georgia.

 The Commissioner’s actions are authorized and legal under a statute that has remained on the books since the 1930s. The legality, however, did not silence his critics. Said one, “The law may permit what he is doing, but the question is does it pass the smell test?”

 Your opinion? Does the Commissioner’s conduct pass the smell test?

Integrity: Essential Ingredient of Those We Trust

August 29th, 2013
Jim Thomas

   “If you have integrity you don’t even need the rules.”

                                                    ____Albert Camus        

 In a recent column in the Atlanta Journal-Constitution, Editor Bert Roughton pointed to the citizenry’s low levels of trust in leaders of government, business, non-profits, and the media, and in   the institutions themselves.

  For instance, the Edelman Trust Barometer’s 2013 Survey revealed that less than one-fifth of the general public believes business leaders will tell the truth when confronted with a difficult problem. The Editor alluded to the adverse consequences of this unfortunate trend.

 To turn things around, Mr. Roughton urged an ‘agenda of greater integrity.’ Agreed; performance with integrity is, indeed, a foundation factor of  trust and credibility. Now as never integrity has no downside; it cannot be over-emphasized. Furthermore, in this frantic hyper-connected age, one of non-stop media and internet transparency, everything lodges in cyberspace. And, somebody somewhere is always watching.

 Public trust matters. It undergirds confidence in an organization’s leadership; it affects the value of its goods and services, as well as the reliability of its advertising and promotions. On June 26, the Wall Street Journal wrote  that as European Union leaders headed for a summit meeting “…they face a crisis harder to fix than their debt problem…a loss of trust in the European Union itself.”

  If institutions and their leaders are to embrace enhanced integrity, they do well to probe the meaning and embrace the essence of it. Not surprisingly, the sovereign virtue is easier to identify than define.

 The word “integrity” comes at us from every point on the compass. Yet, few pause to define it, or to describe its contributions to everyday life. Even fewer search for its governing tenets—until   they face being compromised and losing their self-respect.

 In substance the virtue radiates adhesion.  It means adherence to principles that withstand moral scrutiny, that are beneficial to the parties involved. Pared to its bed rock basis, integrity is an uncompromising loyalty to the right ideas—even when it is inconvenient, difficult, or unprofitable. In sum it encompasses the right choice, at the right time, for the right reason, even if no law, rule or regulation, requires it.

 Here is how it looks up close. Those for whom integrity is an imperative  place a premium on trustworthiness and   reputation; they  keep their word in matters great and small; they ascribe a heavy weight to accountability; they deliver as promised, when promised, in the manner promised; they stand up and are counted when it counts; they refuse to play fast and loose with the rules. They exert scrupulous honesty and tell the truth regardless of the consequences, knowing full well that when declaring the truth hurts ultimately it helps. And, they abide by the proven proposition that HOW they perform is as critical as WHAT they perform.

 Therefore, responsible and responsive leaders—wherever you are—grasp this timeless message. Advance Mr. Roughton’s ‘agenda of integrity.’ We, you, and the public interest—all of us, stand to benefit.

Alleged Kickbacks at Drug Company Trample Integrity and Prove Costly

May 9th, 2013
Jim Thomas

The lesson is well known yet frequently ignored. Avoiding the timeless tenets of integrity can result in costly fines, penalties, and huge lawyer fees. The lesson holds, in particular, for a company with a high-profile in the market place.

This time civil investigators claim the breaches occurred at Novartis Pharmaceuticals. Two lawsuits filed in Federal Court aver; (1) the company made fraudulent kickbacks to promote sales of its products; (2) that it provided illegal rebates and discounts to 20 or more influential pharmacies for persuading doctors and institution to switch from other drugs to Myfortic, a Novartis medication. Novartis says it will defend the allegations.

Three years ago Novartis faced similar charges. Then the accusations were; (1) that it promoted drugs to health care professionals for uses unapproved by the FDA; (2) that it provided kickbacks to physicians in the form of entertainment, appointments to advisory boards or speaker programs. Some activity it was claimed was contrary to Novartis’s own internal policies. Novartis denied all allegations then and now. However it settled with the government in the earlier suit with a payment of $422.5 million.
In addition, Novartis was also required to sign a “Corporate Integrity Agreement.” Its terms, in part, ensure compliance with regulations that apply to drug promotions.

These debacles and their attendant costs are preventable. How? With conduct and procedures that place a premium on Performance with Integrity. A few of its feature include:
1. Adoption of a Code of Integrity
2 Preaching Integrity at Meetings and Gathering
3. Awarding Personnel who Demonstrate Integrity
4. Periodic Internal Integrity Audits

An “Integrity Checklist,” “Guide for Drafting an Integrity Code”, and a “Model Code” are available at no cost from Allianceforintegrity.com.

The Lapses of Integrity in J.P. Morgan’s Escalating ‘Whale’ Scandal are Proving Costly

March 18th, 2013
Jim Thomas

The revelations were painful to watch, Top executives of J.P. Morgan, the nation’s largest bank, testified last Friday before a U.S. Senate committee investigating the firm’s $6 billion losses last year in derivatives trading. Appearing distressed, defensive, even apologetic, one executive after another described failure to uphold standards in the world of high finance. The breaches have damaged the New York bank’s superb reputation for prudent management of financial risks.

Integrity entails upholding correct standards—irrespective of temptations otherwise. When a preeminent firm like Morgan breaches integrity the costs in diminished reputation, trust, and reputation are high. Once damaged reputationsare torment to regain.

The testimony revealed numerous lapses. Playing fast and loose with regulations, the bank failed to furnish regulators mandatory reports of profits and losses. Meanwhile losses were reaching monumental levels. Transparency failed from contradictory phone calls to and from regulatory officials. References flew from a 301 page report accusing Morgan of misleading investors and regulators about risks taken by trading operations in its London offices. Deviations occurred when the bank declined to volunteer profit and loss data until huge losses were already in place. There was testimony that Morgan’s London traders began placing inaccurate prices on their positions as losses grew in early 2012.

More testimony is expected this week.

Though easy to identify, integrity in the abstract if often overlooked. But its true meaning is there for all to see who will see. It radiates an adhesion. It means adherence to a set of standards—convictions—principles—even when inconvenient, difficult, or unprofitable to do so. The standards are those that withstand moral scrutiny and are beneficial to the parties affected.

Albert Camus said, “If you have integrity you don’t even need the rules.”

The cardinal virtue of integrity allows no compromise with the truth. Silence when there is a duty to speak, ill-advised avoidance, the fudge, sidestep, waffle, cover-up—indeed fabrication of any form—are lethal adversaries of Performance with Integrity. Of these verities, J.P. Morgan’s conduct in the escalating “Whale” scandal provides another timely and timeless lesson.

Peregrine Financial’s Founder Made Wrong Choices in Another High Profile Breach-Of-Integrity Scandal

February 16th, 2013
Jim Thomas

On February 1, the Wall Street Journal reported yet another outrage in the brokerage, futures, and securities industries. Russell Wasendorf Sr., founder of Peregrine Financial Group in Cedar Rapids, Iowa, admitted improper use of client funds and deceiving regulators. Losses are expected to total $190 million. The executive’s son accused his father of making “poor choices.”

Performance with Integrity necessitates the deliberate choice. The individual, the company, the partnership, the organization elects to do the right thing, at the right time, for the right ideas.

Right choices include upholding the accepted standard of the industry, firm, group, profession. Of his own volition, Wasendorf chose to breach a sacrosanct standard of the futures industry by diverting client funds for personal use. He also admitted to running a Ponzi scheme

In his influential book, Your Greatest Power, Psychologist J. Martin Kohe writes that the power to choose is the greatest single power of the human psyche.
A pre-determined choice, that is key. One cannot know the proper route to take without first thinking about it. Not necessarily the superior choice, but—by all means—avoidance of the wrong choice.

The Wassendorf breach had devastating consequences. Peregrine is in bankruptcy. His clients have lost millions, and he himself faces ruin and prison. Russell Wasendorf, Jr., chief operations officer, stated “My father’s poor choices shattered my family, ruined my reputation, fractured my marriage, and separated me from my oldest son and close friends.”

But all is not rotten in America. It is full of good people—noble, selfless, generous people. They push when others call for retreat. Their lives professions, and businesses are standing monuments to Performance with Integrity.

ATTENTION. If you are interested in advancing the cause of Integrity in America. If you seek benefits and pay-offs of greater integrity in your occupation, organization, profession, or enterprise, join The Alliance for Integrity on Facebook at Facebook.com/allianceforintegty.

Morgan Stanley Enforces Its Code of Conduct—“Leading With Integrity”

January 8th, 2013
Jim Thomas

Founded in 1935, Morgan Stanley is one of America’s leading financial firms. From the beginning, its partners ascribed heavy emphasis to upright conduct. Morgan executive, Bryan Jennings, found just how heavy when he was fired over a cab-fare dispute with a New York taxi driver.

All Morgan employees are required to read, acknowledge they have read, and abide by “Leading With Integrity.” It reads in part:

 ”We promote a culture of integrity by taking personal responsibility for our actions making the right decision and being accountable…If you violate this Code or any other Morgan Stanley policy of procedure, you will become subject to the full range of disciplinary sanctions, including termination of your employment…”

The Jennings incident occurred on the night of December 21, 2011, when the investment banker departed a gathering at a Manhattan bar following a charity event. Mr. Jennings climbed into a cab for the 40-mile ride to his home in Darien, Connecticut. Nearing end of the ride the driver is said to have demanded $294. A fracas ensued with rider fleeing the vehicle leaving driver with a lacerated scalp. The driver claimed Mr. Jennings pulled a pen knife from his briefcase.

On February 29, Darien Police arrested Mr. Jennings and charged him with second-degree assault and “intimidation by bias.”Criminal charges were ultimately dropped, but the episode became a matter of public record.

In early October. Mr. Jennings was fired. The Wall Street Journal reported that Morgan officials declined to discuss the details. However persons close to the case indicated the cause was the investment banker’s violation of behavioral standards set out in “Leading With Integrity.” Mr. Jennings’s altercation was viewed as damaging to the firm’s reputation.

Morgan Stanley has hold on an iron-clad truism: harm to the firm’s reputation is as damaging as other forms of outsize losses. And, executives at the firm are acutely aware that the great underpinning of reputation is conduct with character and integrity. Boiled to its bare –bone essence integrity means adherence to standards, principles, and conviction that withstand scrutiny, that are beneficial to the parties—even when adherence is difficult, inconvenient, or unprofitable.

In today’s scandal-plagued financial industry, Morgan Stanley’s actions stand stout as an oak.

[For more complete details of this story see The Wall Street Journal, December 19, 2012, page C1.]

WHEN INTEGRITY FAILS; THE CASE OF GENERAL PETRAEUS

December 3rd, 2012
Jim Thomas

From every standpoint, the scandal surrounding General Petraeus demonstrates once again a universal truth. That is, when it counts, in all settings, the failure of Integrity bears detrimental consequences. At the highest levels of government and public trust, the consequences become of monumental import.

Consider the evidence. When Petraeus made the wrong choices—and Integrity is always about choice—the nation lost a valuable public servant. Shame poured on the Army and the CIA. Disbelief and dismay spread wide and deep, further diminishing confidence in the institutions of government. At the personal level, the scandal besmirched the General’s reputation and self-respect, priceless intangibles no one can afford to lose.

Where the breach? The First Great Virtue—is based on a fundamental tenet. It requires adherence to standards that withstand moral scrutiny, that to some extent in some manner are beneficial. In simple terms, the tenet means holding fast to time-honored principles, even when difficult, unprofitable, or inconvenient.

In the Petreus case, the governing standards were encoded at West Point, in the Army, and at CIA. When the General let go of them, the breach was joined and unwanted consequences burst like a tornado. In this hyper connected transparent age of the Internet, no sin goes unnoticed. Somebody is watching, precisely as the General himself once warned an Army audience.

The sovereign virtue of Integrity does not always demand the superior choice. By all means, however, it demands avoidance of the wrong choice. May all view the fall of David Petraeus—and learn.

.From every standpoint, the scandal surrounding General Petraeus demonstrates once again a universal truth. That is, when it counts, in all settings, the failure of Integrity bears detrimental consequences. At the highest levels of government and public trust, the consequences become of monumental import.

Consider the evidence. When Petraeus made the wrong choices—and Integrity is always about choice—the nation lost a valuable public servant. Shame poured on the Army and the CIA. Disbelief and dismay spread wide and deep, further diminishing confidence in the institutions of government. At the personal level, the scandal besmirched the General’s reputation and self-respect, priceless intangibles no one can afford to lose.

Where the breach? The First Great Virtue—is based on a fundamental tenet. It requires adherence to standards that withstand moral scrutiny, that to some extent in some manner are beneficial. In simple terms, the tenet means holding fast to time-honored principles, even when difficult, unprofitable, or inconvenient.

In the Petreus case, the governing standards were encoded at West Point, in the Army, and at CIA. When the General let go of them, the breach was joined and unwanted consequences burst like a tornado. In this hyper connected transparent age of the Internet, no sin goes unnoticed. Somebody is watching, precisely as the General himself once warned an Army audience.

The sovereign virtue of Integrity does not always demand the superior choice. By all means, however, it demands avoidance of the wrong choice. May all view the fall of David Petraeus—and learn.

.

IN THE CORPORATE CULTURE: THE HIGH COST OF EVADING THE TRUTH—THE JACK IN THE BOX CASE

October 22nd, 2012
Jim Thomas

In any organization, suppression of the truth, in all of its myriad variations, is a lethal adversary of Integrity. Without Integrity good works, products, and services find fewer and fewer takers. The competitive edge is diminished and damaged. The penalties, too, are often high.

Note the case of Jack in the Box, as reported in Johnson and Phillips’ book, Absolute Honesty, American Management Association, 2003.

The case arose during a period marked by contaminated and poisoned products appearing in the market place. The Tylenol case was among them. That company’s upright chief executive minced no words and told the unfettered truth, while removing its product from the market. It came back stronger than ever because consumers believed they could trust it.

Jack in the Box adopted a different approach. From 1992 through January 1993 accounts were publicized that contaminated beef served at company stores was linked to the illness of 700 people. The Center for Disease Control in Atlanta concluded the culprit originated in tainted meat. The material was insufficiently cooked at company restaurants.

Washington State Health Department confirmed findings at Disease Control. Whereupon Jack in the Box immediately denied all responsibility. It claimed its sickened customers had dined at other restaurants before becoming ill. Six days of silence followed.

President Robert Nugent of Jack in the Box admitted his company was in fact the source of the contaminated food. However, he combined the admission with an attack on the Health Department’s failure to distribute food handling regulations in a timely manner.

His approach proved ill-advised. Public response was as negative as it was disastrous. Newspaper editors far and wide accused Nugent and his company of shirking its responsibilities. By the end of March 1993 the debacle had cost Jack in the Box in excess of $30million in lost revenue. Liability damages eventually exceed $100 million.

Harry Beckwith, one of the country’s leading authorities on marketing, author of the acclaimed book, Selling the Invisible, has this advice for his clients: “Invest in and preach Integrity. And tell the truth, always. For even when it hurts it will help.”

A Mistakenly Shipped Cargo and the Tenets of Integrity

October 12th, 2012
Jim Thomas

[This incident transpired in interstate commerce in the early 1950s. Only names are disguised.]

 Broad River Kennels in Kentucky traded in hunting dogs. It advertised nationally in Field & Stream and other outdoor publications. Wording of its ads was limited. They listed hounds for sale by type, breed, and cost. Payment F.O. B. by rail.  Buyer was granted a ten-day trial.  If the hound proved unsatisfactory, buyer could return the animal for a refund, provided he paid cost of shipment. No other words appeared in the ad save those stating “first class hunters.”

 Hank Jones, a Georgia resident, was a serious hunter and hounds man. Relying on a Broad River ad, he ordered via letter a Blue tick Coon Hound, listed for $50, plus shipping costs.  In due course, the animal arrived by rail in the customary wooden crate. Shipping documents stated the dog’s name was “Rattler.” The hound was not a Blue tick.  However he was a good looking dog, lanky, red-ticked, with a tongue like church bells.

  Jones liked the looks of the animal and his deep-throated tongue. He neither objected nor gave notice of the kennel’s failure to ship a Blue tick. Instead, he paid price and costs and assumed ownership. Payment was received and accepted.

  In field trials, Rattler promptly proved a dynamite coon hound.  Jones recalled that years earlier he had seen one similar hound. With help of a librarian, he identified the animal as an American English Coon Hound.

  Two weeks after expiration of the ten-day trial period, Jones received a certified letter from Bill Boswell, owner of Broad River Kennels. The letter stated Rattler was one of Boswell’s personal hunting dogs. He had paid $1500 for him three years earlier and had the “papers” to prove it. An inexperienced worker mistakenly shipped the wrong hound. He asked Jones to return the dog, with an offer to refund the purchase price and pay shipping and handling costs.

 Jones refused. He asserted that purchase and sale of the dog, in every respect,     was an above-board, arms-length transaction. Rattler was his, fair and square. He intended to keep it, and did. 

 The Cardinal Virtue of Integrity turns on doing the thing one should do because it is right, notwithstanding no rule, law, or regulation require it. Justice Potter Stewart of the U.S. Supreme Court wrote “There is a difference between what you have a right to do, and what is the right thing to do.

 

 In light of the foregoing:  How do you come down? Did Jones act with Integrity? Was he justified in keeping Rattler? Or, should he have complied with the original owner’s request and returned the animal?