April 2011 Archive

Last week hundreds of thousands of people watched the President of the Czech Republic pocket a pen before a live and televised audience. More than 2,345,000 viewed his action on YouTube. Back home in Czechoslovakia, a Facebook page campaign was launched to mail pens and pencils to the president. More than 5,000 Czechs have signed up.

Theft can be defined as the willing and conscience appropriation of what is not yours.

Theft has a major impact on the economy. In the U.S alone:

• A motor vehicle is stolen every 26.4 seconds. According to the FBI, the estimated property loss due to car theft was $5.2 billion in 2009.
• Shoplifting is the number one property crime in America. More than 10% of the public shoplifts and retailers lose more that $20 billion a year due to shoplifting.
• Approximately 15 million U.S. residents had their identity stolen at a cost of $50 billion a year.
• Cheating on taxes is another form of theft. The IRS estimates 17 % of taxpayers do not comply with tax laws and according to the IRS Oversight Board more than 10% of taxpayers (admittedly) think it is “OK” to cheat on their tax return. The amount loss per year to the Treasury is close to $500 billion. Over the past decade tax evasion has cost the U.S. government $3 trillion. The current U.S. deficit would be significantly improved if more people were honest in their reporting of income.

Why do people cheat and/or steal?

There are many explanations. Benedict Carey in his article “The Psychology of Cheating” thinks that people cheat when they feel that they have been treated unfairly. He quotes Dr. Anhan Chatterjee, a neurologist at the University of Pennsylvanian who says: “Cheating is especially easy to justify when you frame the situations to cast yourself as a victim of some kind of unfairness. Then it becomes a matter of evening the score; you are not cheating, you are restoring fairness.”

I am not sure I totally agree with that explanation. It seems to me a self-justification after the fact. At one level or another we all know that cheating and stealing is wrong, period.

Max H. Bazerman, a professor of business administration at Harvard, and Ann E. Tenbrunsel, a professor of management at the University of Notre Dame, the authors of “Blind Spots: Why We Fail to Do What’s Right and What to Do About It” make an interesting point in their NYT article dated April 20, 2011 entitled “Stumbling Into Bad Behavior. They believe that people behave unethically when they fail to recognize that the decision they are about to make has an ethical component. The authors also believe that we have a “tendency to overlook information that works against one’s best interest.”

Few people wake up in the morning thinking: “Today, I will lie, cheat and steal.” Only the criminal mind thinks that way. However we may all think of ourselves as more ethical that we actually are.

I do not know the monetary value of the pen the President of the Czech Republican stole but I know that we are all at risk of sliding down the slippery slope that starts with a minor infraction but that can lead to major disaster. It can begin by an apparent small compromise of integrity, something we should avoid at all cost.

As Chinua Achebe once said:

“One of the truest tests of integrity is its blunt refusal to be compromised.”

Last month, on March 14, 2011, Warren Buffet’s company Berkshire Hathaway announced the decision to purchase Lubrizol, a chemical company, for $9 billion dollars based on the recommendations of David Sokol, one of his senior executive and advisor. Following the announcement the value of stock of Lubrizol jumped by 28 %.

After the purchase announcement, it was revealed that David Sokol, back in January 2011, had purchased for his own account, close to 100,000 shares of Lubrizol. He could possibly make a profit of $M2.8 from the transaction.

Mr. Sokol then resigned abruptly. He denies that his resignation was linked to the revelation of his purchase of the Lubrizol stock. In defense of his actions, Mr. Sokol says that he bought the shares based on public information and that at that time he had no idea whether Warren Buffet would follow his recommendation to purchase Lubrizol.

Mr. Buffet himself says that Mr. Sokol did nothing wrong.

Many in the press and corporate ethics professionals consider Mr. Sokol action as a breach of ethics and possibly a violation of SEC Insider Trading laws.  Tim Mazur, the CEO of the Ethics & Compliance Officer Association (ECOA) is very critical of Mr. Sokol. He says: “its anti-capitalism. It’s anti-America. It’s wrong. It’s just greed and self-interest.”

The spirit (or philosophy) behind the insider trading laws, I believe is fairness. The SEC defends fairness to investors or potential investors (aka the public) who do not have access to privilege information.

Francis Bacon said that “knowledge is power.” We are all, in some degree, “insiders” and sometimes we trade information for our own benefits in exchange for personal prestige, or even immediate monetary benefits.

Can one be an ethical trader (of information)? What values should we respect in order to be ethical in giving of the information?

I think the issue here is respecting confidentiality. Respecting confidence is a great value and character trait that inspires trust.

When you betray someone’s secrets, people may seem to be appreciative because of the immediate benefit your information is providing but in the long run, the same people will most likely despise you because they know that you may very well betray their confidence in the future.

As King Solomon once wrote:

“A gossip betrays a confidence, but a trustworthy person keeps a secret.”

However it is also true that in some case we have a moral and sometimes legal obligation to reveal wrongdoing either to prevent its recurrence or simple because justice compels us to do so.

The British Evening Standard published an article on March 28^th 2011 that is very critical of PR companies in the UK, some of which are subsidiaries of U.S. firms, for representing dictators such as Libyan leader Colonel Khadafy.

Lord Bell of Bell Pottinger, one of the firms mentioned in the article is unapologetic and says:

“No amount of media harassment or sensationalism is going to stop me representing clients that have a legitimate right to tell their story.”

Does every client have a legitimate right to tell his or her story? What if the story is false and pernicious?

In my view every individual and corporation has a right to free speech but that does not mean that they have a right to hire a PR firm. Hiring a PR firm is a privilege, not an entitlement. Furthermore every PR firm or individual has a right to refuse an assignment.

Ruder Finn’s Guideline on Ethics makes it clear that the firm does not want to be involved in any activities that denies human rights. In the early 60s, Ruder Finn resigned a large account with the Greek Tourism Office because we were convinced that human rights were being violated by the government of Greece after three Colonels took office by a military coup.

Human Rights should be our primarily concern even more than Democracy. Although Democracy usually offers the best guarantee and protection of Human Rights, it also has its fallings. The best examples of these failings are Gaza and Iran. In both cases, the regimes in place deny basic human rights to their subjects. Yet the people in power were elected “democratically.”  Nichola Kristoff’s is right when he writes in his New York Times March 31^st Op-Ed “Democracy is messy.”

In our Guideline on Ethics, we also say that we want to be proud of the work we do, and that somehow also includes being proud of the clients we represent.

Tom Epps, the Chair of PRSA’s Board of Ethics and Professional Standards makes a few interesting points in his blog posting. He quotes the PRSA code that says that we are responsible for “protecting and advancing the free flow of accurate and truthful information. And that we are “faithful to those we represent, while honoring the public interest, putting the public interest first.

Paul Holmes, who was interviewed by the British Evening Standard for the article mentioned above, points out in his blog entitled: “Laundering is not bad if things actually end up cleaner” that “PR firms can do ethical work for unethical clients, which is to say they should be evaluated on the content of their campaigns rather than on the identity of the client.” He adds that “good public relations counsel involves advice on how the client acts, not just on what he or she says.”

I think that it can be morally acceptable to work for a client whose conduct we might disapprove of as long as the work we do is not contrary to our values and principles, such as truth, accuracy and transparency. I also believe that, in some cases, ethics will demand that we do not associate ourselves, irrespective of the work we are asked to do, with clients whose overall behavior we abhor.

We should also remember that working for an individual (dictator or not) or a corporation whose reputation is questionable might taint our reputation as well.

As George Washington once said:

“Associate with men of good quality if you esteem your own reputation;

for it is better to be alone than in bad company.”