Business Ethics as a Core Course in Business Schools? What a novel idea…or do you prefer an Orange Jumpsuit and Handcuffs?

July 18, 2012

What a novel idea is right…  It seems that what is OBVIOUS sometimes is missed by the masses.  Honesty, integrity, and ethics are – or should be – the core foundation for which we operate in life.  Yet, as Luigi Zingales points out in his article: “Business School should count ethics as a core course” it appears that all to often those who are at the top of the business food chain seem to forget the core of business fundamentals.

Zingales, in his article, states: “Recent scandals at Barclays, JPMorgan Chase, Goldman Sachs and other banks might give the impression that the financial sector has some serious morality problems. Unfortunately, it’s worse than that: We are dealing with a drop in ethical standards throughout the business world, and our graduate schools are partly to blame.”

The problem – at one level – is academics seem to be more concerned with theory than practical application.  Again, Zingales shares the following:

Most business schools do offer ethics classes. Yet these classes are generally divided into two categories. Some simply illustrate ethical dilemmas without taking a position on how people are expected to act. It is as if students were presented with the pros and cons of racial segregation, leaving them to decide which side they wanted to take.

Others hide behind the concept of corporate social responsibility, suggesting that social obligations rest on firms, not on individuals. I say “hide” because a firm is nothing but an organized group of individuals. So before we talk about corporate social responsibility, we need to talk about individual social responsibility. If we do not recognize the latter, we cannot talk about the former.

I agree!  Ethics theory – while valuable – doesn’t go far enough to teach those who will face practical application what to do and when to do it when faced with pressure and temptation.  Theories are wonderful, but how many of us think about theory when faced with real life challenges in real time.

As a business ethics speaker, I was set up as the keynote speaker at a university in Canada.  My background was hidden from the faculty as the Dean of the Business School…wanted my presentation to impact both the student attendees as well as the faculty guests.  To that end, as we prepared to share dinner together before the presentation, one of the professors asked me a simple question – “What theory of ethics do you follow?”

That question caught me a bit off guard as my mind raced to formulate an appropriate answer.  Then it hit me…  The answer just flowed from my mouth – “The theory that keeps you out of federal prison!”

“Oh” responded the professor, and quickly he found company somewhere else.  Discomfort created by my response is just what needs to take place when teaching ethics.  We, all too often, make ethics some luke warm course to fill a curriculum and fail to teach the real world application of what happens when ethics fail.  Zingales says:

The way to teach these ethics is not to set up a separate class in which a typically low-ranking professor preaches to students who would rather be somewhere else. This approach, common at business schools, serves only to perpetuate the idea that ethics are only for those students who aren’t smart enough to avoid getting caught.

Rather, ethics should become an integral part of the so-called core classes – such as accounting, corporate finance, macroeconomics and microeconomics – that tend to be taught by the most respected professors. These teachers should make their students aware of the reputational (and often legal) costs of violating ethical norms in real business settings, as well as the broader social downsides of acting solely in one’s individual best interest.

So here’s the deal…if your business school isn’t committed to teaching practical ethics then you can’t expect graduates to apply ethics in practical day-to-day applications.  What is practical ethics – perhaps it’s ethics applied in such a manner that it keeps you out of an orange jumpsuit and handcuffs.

Your comments are welcome


Colorado State University and the University of Northern Colorado Present Symposium on Business Ethics Aug. 11-12

July 27, 2011

News Release re: Ethics Education

FORT COLLINS – Colorado State University and the University of Northern Colorado will present the Daniels Fund Ethics Initiative Leadership Symposium on Business Ethics Aug. 11-12.

In a business era punctuated by new and serious ethical challenges, this two-day interactive symposium is geared toward providing relevant tools and practice for navigating ethical dilemmas that professionals may encounter. All sessions will take place at the Bohemian Auditorium inside Rockwell Hall West on the CSU campus.

A variety of noteworthy speakers and presenters have been selected to lead the symposium in the following areas:

• Corporate Governance and Business Ethics Case Study – Led by Eric M. Pillmore, senior advisor for corporate compliance, Deloitte Center for Corporate Compliance and the former vice president of corporate compliance, Tyco International, this interactive session will engage participants in a case study of Tyco International and offer recommendations on how to restore an ethical culture to a company.

• Social Responsibility and Business Ethics – Bryan Simpson, media relations director for New Belgium Brewing Co., will lead a discussion of the company’s efforts toward maintaining sustainability and social responsibility in their business operations. Thomas Dean, professor of entrepreneurship and sustainable enterprise and the Daniels Ethics Professor at Colorado State University, will facilitate an interactive exercise where participants will balance profit maximization and sustainable business choices.

• Applying Ethical Decision Making at Work – Using business-based ethical dilemmas, Linda Ferrell and O.C. Ferrell, both professors of marketing and Bill Daniels Professors of Ethics at the University of New Mexico, will guide participants toward making workable recommendations based on unique organizational roles and perspectives. The two also will provide a framework for definitions, examples and overall understanding of organizational ethical decision making.

• Ethical Decision Making Simulation – Barney Rosenberg, a veteran of three decades of leadership in business ethics and corporate compliance, will lead this session that asks participants to use the knowledge gained in the symposium as a mock board of directors is forced to navigate a complex business environment in the corporate fast lane. Rosenberg, vice president of ethics and business conduct for The Meggitt Group, is a former general counsel for Mattel Corporation and a former deputy general counsel for Pitney Bowes.

This Leadership Symposium on Business Ethics is made possible through the support and leadership of the Daniels Fund, reflecting the interest in ethical business practices of Bill Daniels, its namesake. The Daniels Fund Ethics Initiative sponsors business ethics studies and research at seven U.S. universities, including Colorado State University and the University of Northern Colorado.

Individual cost to attend the symposium is $450, which includes breakfast, luncheon and evening networking event meals. To register for the conference or to learn more, visit http://transition.biz.colostate.edu/RSVP/2011LeadershipSymposium.aspx


Fidelity National Title Insurance Company – When a presentation hits the Mark – Comments by Chuck Gallagher Business Ethics Speaker

June 3, 2011

For most of us in the speaking profession, we diligently work to make sure that what we share makes a difference.  While there is no criticism in being called a Motivational Speaker – the fact is – as a Business Ethics speaker – I want to make a lasting difference when I share with an audience.  Far more important to me for someone to walk away with something of value, than to get a standing ovation for a performance that folks will forget two weeks later.

Each presentation begins with the words – “Every choice has a consequence!”  If there is a take away – remembering that simple phrase can make the difference in folks making ethical choices that are empowering or finding the consequences of their unethical choices painful.

Recently I had the opportunity to speak to Fidelity National Title Insurance Company in Florida.  The crowd was responsive, yet I find that often my pointed presentation hits buttons for some creating emotional reactions.  Yet others (fortunately typically 98%) get the message.

Just a few days ago I receive an email from the meeting planner stating the following:  “I thought you would really like this Chuck.  Confirmation that your presentation really hit the mark.  Thanks again.”  Attached was a link to a recent blog post…a portion is reproduced below and the full link is here.

The Man in Handcuffs

Submitted by Stephen Collins on Mon, 05/23/2011 – 8:18am

How interesting do you think a title insurance conference is?  As good as this blog—hardly!  But Fidelity National Title Insurance Company does have a reputation for production, and I’m not just talking number of policies sold.  They put on a conference in a fair atmosphere, but when they talk ethics, they’re all business—need and opportunity do NOT justify stealing.

Fidelity National is an underwriter for Land Title of America, and we’re used to their non-conventional presentation of material.  If it’s a really boring subject, they’ll make it like a game show with Ozzy Osbourn and Minnie Pearl—you’re not going to forget the information!  For their talk on business ethics, the speaker wore an orange jumpsuit and his hands were cuffed behind him.  We thought he was another one of their gimmick speakers.  He was not.

True…a gimmick speaker I am not!  There is nothing funny about making unethical choices, losing everything (other than the love of my two sons) and spending time in federal prison.  Yet, that experience, as gnarly as it was – turned out to be one of the best things that could ever happen to me.  The consequences that followed my seriously poor unethical choices have provided a powerful framework today for sharing with others about the power of choices and ethical behavior.  Beyond theory, I share from the heart in a way that people can relate to – my message is one of choices, consequences and hope.  We are more than our mistakes and often we can avoid those mistakes if we connect the dots between choices and consequences.

Stephen Collins posts ends – “He had committed fraud and he faced up to it.  He lost his family and he served time for what he did, wearing an orange jumpsuit like that every day.  The difference now is that he holds the key to his handcuffs, and he’s come a long way through a lot of trials to say Don’t commit fraud.  When you have need and opportunity, don’t justify it to do something you know is wrong.”

Thanks to the folks at Fidelity National Title Insurance Company, it was my honor to be a part of their commitment to ethics and ethics training.


Business Ethics Training – What’s up in Cuyahoga County and Why aren’t more Municipalities taking a proactive Ethics approach?

May 29, 2011

Recently I was asked to speak at the Florida Association of Counties 2011 Annual meeting – my presentations will be on Ethics.  In the conversation leading up to the decision to engage me, it was interesting as I was told about numerous ethical issues that face elected officials and those staff employed by the various local governments.  All too often the focus on ethics is about WHAT to do and HOW to do it.  My presentation brings a different look at Ethics.  For me, to have an effective ETHICS program one must look beyond the “What” to the “WHY.”

When organizations can identify WHY otherwise ethical people make unethical decisions or do unethical things, then – and in my opinion – only then can you have a program that creates a true ethical culture.

I mention the above cause today I received notice that Cuyahoga County offers first ethics training for businesses which is a step in the right direction.  The article that appeared is as follows:

The training comes in the wake of a more than two-year federal corruption investigation, which has charged more than 50 people and exposed a culture of pay-to-play that extended from county offices to suburban school boards.

County Auditor Frank Russo has been sentenced to nearly 22 years in prison for his crimes, while Commissioner Jimmy Dimora has pleaded not guilty to charges and faces trial in January.

The county’s new ethics code is much stricter than one that used to govern the former commissioners’ offices. The policy forbids hiring of relatives, requires county officials and employees to disclose potential conflicts of interest and requires staff members and those doing business with the county to sign ethics statements. Contractors and lobbyists must register with the inspector general, and they may not give anything of value to employees or make campaign contributions.

Dettelbach, meanwhile, founded the Northeast Ohio Business Ethics Coalition in October. About 75 local companies have already joined, signing a pledge to reject corruption and unethical businesses practices.

“We continue to transform our region into a place where shakedowns are met not with silence and acquiescence, but with outrage and resistance,” Dettelbach said in the release. “Just as we do drug prevention by talking to kids in school, we are working with the business community and our public institutions to try to stop bribes and kickbacks before they occur.”

The training will take place from 9:30 a.m. to noon at the Cleveland Public Library, Louis Stokes Wing Auditorium. To register, visit the county web site and click on “Contract vendor ethics training registration.”

My hat is off to them and I suspect as more issues of corruption surface (and they will surface)… this type of proactive approach is something that is a clear step in the right direction.  My hope is that the training will not center solely on what is ETHICAL and what is not, but rather why people who know the difference between right and wrong – ethical and unethical – make unethical choices.  If we take the time to indentify the WHY we stand a much better chance of avoiding the WHAT that often leads to prison!

YOUR COMMENTS ARE WELCOME!


Ethics gone wrong! Medical Equipment Company – Doris Vinitski – John Lachman plead guilty to Health Care Fraud Scheme and Illegal Health Care Kickbacks

May 3, 2010

As I prepare to speak to members of the Laboratory Products Association meeting on ethics, I ran across this news release from the Department of Justice about yet another health care fraud.  I am pleased that so many folks in the health related field are ethical and have a strong desire to do the right thing – or make the right choices.  As I visited with LPA members this evening, I got that very real sense, as many didn’t know that I was their final event speaker, that they welcomed the opportunity to feature ethics and ethics training so that they could help others (employees, vendors, etc) know the value of making positive choices – even in the face of economic uncertainty.

The unfortunate thing is that the “bad apples” tend to spoil the whole bunch by giving a bad name to segments of an industry.  The news release was issued on April 28th, 2010 and represents yet another example of people who find greed and lack of ethics eventually has a consequence.  Tomorrow, when I deliver my keynote presentation, the first words out of my mouth will be – “Every choice has a consequence!”  In the case of Doris Vinitski and John Lachman they are just beginning to understand the effect between choices and consequences.

Houston-area residents Doris Vinitski and John Lachman pleaded guilty today in connection with their roles in a durable medical equipment Medicare fraud scheme, the Departments of Justice and Health and Human Services (HHS) announced.

According to court documents, Vinitski, 45, was the owner of Onward Medical Supply, a Houston-area durable medical equipment company. Lachman, 45, operated the day-to-day business for several years, and Vicki Phillips, 53, was a patient recruiter for Onward. Vinitski and Lachman, who is Vinitski’s estranged husband, each pleaded guilty today before U.S. District Court Judge Nancy Atlas of the Southern District of Texas to one count of conspiracy to commit health care fraud. Phillips pleaded guilty on April 21, 2010, to one count of conspiracy to defraud the United States and to paying health care kickbacks.

Onward began billing Medicare for fraudulent durable medical equipment in 2003, according to court documents. Vinitski and Lachman admitted they paid kickbacks, sometimes $1,000 per patient, to recruiters who brought patients to Onward. Lachman and Vinitski then would bill Medicare for durable medical equipment that these patients did not need or never received.

Phillips admitted that she recruited Medicare beneficiaries for the purpose of allowing Onward to submit claims to Medicare for durable medical equipment, including power wheelchairs and orthotic devices. Phillips also admitted she received kickbacks from Onward for each patient she recruited whose claims were reimbursed by Medicare.

Lachman and Phillips are scheduled to be sentenced on Aug. 16, 2010. Vinitski is scheduled to be sentenced on Aug. 17, 2010. Lachman and Vinitski face a maximum penalty of 10 years in prison and a $250,000 fine. Phillips faces a maximum penalty of five years in prison and a $250,000 fine.

Seven additional defendants allegedly involved in the scheme – Dr. Howard Grant, Clinton Lee, Michael Kalu Obasi, Darnell Willis, Ju-Ying Cian, Obisike Nwankwo and John Nasky Okonkwo – are scheduled for trial on May 17, 2010. The charges against these defendants are merely allegations and they are presumed innocent until proven guilty.

The guilty pleas were announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney José Angel Moreno of the Southern District of Texas; Richard C. Powers, Special Agent-in-Charge of the FBI’s Houston office; Special Agent-in-Charge Mike Fields of the Dallas Regional Office of the HHS Office of Inspector General (OIG), Office of Investigations; and Texas Attorney General Greg Abbott on behalf of the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU).

The cases were prosecuted by Assistant Chief John S. (Jay) Darden and Trial Attorneys Jennifer L. Saulino and O. Benton Curtis III of the Criminal Division’s Fraud Section. The cases were investigated by the FBI, HHS-OIG and MFCU.

The case was brought as part of the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section. Since their inception in March 2007, Strike Force operations in seven districts have obtained indictments of more than 560 individuals who collectively have falsely billed the Medicare program for more than $1.2 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov

To commit a fraud, typically three components must exist:  (1) need; (2) opportunity and (3) rationalization.  The question here is what triggered the “need” component and how did they “rationalize” their behavior.

People who, perhaps, are close to those involved are encouraged to comment so we can flush out the underlying motives in this unfortunate fraud.

YOUR COMMENTS ARE WELCOME!


Ethics Training – An Effective Defense According to New Sentencing Guidelines – Comments By Business Ethics Speaker Chuck Gallagher

April 28, 2010

At the risk on the front end of sounding self serving as an ethics speaker and trainer, the reality is – interest in ethics training and compliance programs  – is increasing and I’m not so sure it is solely for reasons of the common good.  Ethics, by their nature, are hard to define as they are not objective in nature.  However, ethics training and compliance programs effectively implemented in a company serve as an excellent defense when there is a breach of ethics by an employee.

New guidelines have been issued that raises the stakes and clarifies the role of ethics training and compliance.  The Sentencing Commission has introduced four new requirements for the receipt of the compliance and ethics program credit:

(1) those with operational responsibility of the compliance and ethics program must report directly to the governing authority or its subgroup, such as an audit committee of the board of directors;

The question I often face in my ethics and compliance work is – short of a Chief Ethics Officer – who has the operational responsibility for compliance and ethics training?  More times that not, this role is combined with HR in smaller operations.  Yet, the combination of that role creates reporting problems.  It’s clear that, in order for the program to work, whomever is charged with the operation of the program must have direct access to those whose roles are deemed independent enough to take ethics issues seriously.

(2) the compliance and ethics program must detect the offense before its discovery outside the organization or before such discovery was reasonably likely;

As the requirements provide – the program must be effective in detection.  More times that not, as I evaluate ethics programs of client companies, I find that detection is given “lip service”.  Honestly, most program in ineffective on that front.  Having a program is not enough, rather, the detection factor is a critical component.  In many cases the most effective way to evaluate detection is to test the system for failures.  Breaches in the system – detected early on – can be corrected so this component of the ethics defense can be utilized.

(3) the organization must promptly report the offense to the proper governmental authorities; and

I am not an attorney, but often I find that organizations weigh the legality of the ethics or misconduct breach with the PR implications of a potentially public disclosure.  Organizations are finding the reality of reporting a practical necessity and, now, a needed part of an effective program.

(4) no person with operational responsibility in the compliance program participated in, condoned, or was willfully ignorant of the offense. If these requirements are met, corporations may receive credit for their compliance and ethics program.

Furthermore, the Sentencing Commission has clarified the definition of an effective compliance and ethics program for the purposes of the culpability score reduction. The Commission elaborates upon the previous requirement of the Guidelines that, after criminal conduct has been detected, the organization must take reasonable steps to respond appropriately and to prevent similar criminal conduct in the future. Specifically, newly added language to the Guidelines clarifies that an appropriate response to criminal conduct is to remedy the conduct’s harm through, for example, restitution to victims, and that the organization must assess its compliance program, potentially with the assistance of an outside professional advisor.

Most companies now need the services of an independent professional adviser in order to evaluate their current program, test the effectiveness there of and help craft any solutions to weaknesses found therein.  Again, at the risk of sounding self-serving, regardless of whom you select, it is important evaluate and potentially shore up ethics and compliance programs.

These recent changes appear to shift the inquiry from an organization’s high-level personnel to the effectiveness of its compliance and ethics program. The changes also clarify the reasonable steps that an organization must take to respond appropriately to criminal conduct and to prevent similar criminal conduct in the future. Organizations may, therefore, choose to tailor their approach to their compliance and ethics programs based on these modifications, unless Congress prevents the changes from taking effect on November 1, 2010.

Whether the changes take effect on November 2010 or not, the guidance provided for Corporate Governance is valid and worth action.


Corporate – White Collar Crime Sentences May be changed. New Guidelines on Prison Alternatives Approved

April 27, 2010

While on one hand I expect a bit of an outcry from the public that, at times, seems to have a taste for blood, the alternative prison sentence possibilities that have been approved are long over due.  Yes…White Collar Crime does create victims and the pain that people feel at the hand of a fraudster is very real, however, the real travesty is that many who have committed white collar crimes and have the ability to work (in some capacity) to make restitution, are disallowed that due to the practicality of an active prison sentence.

The information is listed below in blue:

After considerable public input, the U.S. Sentencing Commission recently voted to send Congress amendments to the federal sentencing guidelines that, among other changes, would increase the availability of alternatives to prison and would alter the sentencing of corporate offenders.

Although the sentencing guidelines are no longer mandatory, judges continue to look to them on a regular basis in determining appropriate punishment.

Under the alternatives-to-prison proposal, courts could depart from the guidelines when an offender’s criminal activity was related to drug or alcohol abuse or significant mental illness and when sentencing options, such as home or community confinement or intermittent confinement, would serve a specific treatment purpose. The commission also recommends that courts consider the effectiveness of residential treatment programs as part of their decision to impose community confinement.

By adjusting offense levels, the proposed amendments would make more offenders eligible for alternative sentencing options, such as split sentences (half in prison, half in alternative), home or community confinement.

“The commission has heard from virtually every sector of the criminal justice community that there is a great need for alternatives to incarceration,” said Chairman William Sessions III in an April 19 statement. “Providing flexibility in sentencing for certain low-level, non-violent offenders helps lower recidivism, is cost effective, and protects the public.” Sessions called the changes a “very modest step” in the right direction.

The commission also has proposed changes on the sentencing of organizations. Most importantly for corporations, a larger number of offending organizations would be eligible for a credit for having an effective ethics and compliance program.

In a firm memo discussing the proposed changes, Gibson, Dunn & Crutcher noted that a number of groups had urged the commission to eliminate the “absolute bar” to getting that credit if “high-level personnel” had participated in, condoned, or were willfully ignorant of the offense. The term “high-level personnel” is defined to include a director, an executive officer, and “an individual in charge of a major business or functional unit of the organization.”

Although no statistics are available, the law firm noted that the per se disqualification applies to several convicted corporations annually. David Debold, of counsel to Gibson Dunn, is co-chair of the Sentencing Commission’s Practitioners Advisory Group.

The commission eliminated the per se bar but attached certain conditions for the credit to apply, the most important of which is that “the individual or individuals with operational responsibility for the compliance and ethics program … have direct reporting obligations to the governing authority or an appropriate subgroup thereof (for example, an audit committee of the board of directors).”

The change, according to Gibson Dunn, would expand the direct reporting required between the person with day-to-day responsibility for compliance—often the general counsel—and the members of the board.

In other changes, it would be appropriate to consider such factors as an offender’s age, physical, mental and emotion conditions, and military service—currently considered “not ordinarily relevant”—in determining whether to sentence outside the guidelines. However, the factors in the particular case would have to be relevant to an unusual degree and distinguish the case from the typical case.

“Through this amendment, the commission is providing the criminal justice system, and particularly judges, with the information they have long sought,” said Sessions. “The more information we can provide on the use of specific offender characteristics during the sentencing process, the more consistency and uniformity will result and the more justice will be served.”

Another amendment responds to the Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act of 2009 by broadening the guideline for offenses involving individual rights to include the new hate crime offense. The act makes it unlawful to willfully cause bodily injury to a person because of the person’s race, color, religion, national origin, gender, sexual orientation, gender identity, or disability. The act also made it unlawful to attack a U.S. serviceman on account of his service, and the sentencing amendment would incorporate this new offense. The commission also expanded the definition of a hate crime in its penalty enhancement for hate crimes to include victims who were targeted because of their “gender identity.”

The amendments must be submitted to Congress by May 1 and will become effective Nov. 1 unless Congress rejects them.

For those who are active readers of this blog, I would suspect that many attorneys representing those who have been convicted of white collar crime will be either working to postpone their sentence or looking for alternative sentencing options which it appears will be available later this year.

I would love to hear your comments on whether you agree or disagree with this new approach to sentencing.

YOUR COMMENTS ARE WELCOME.