“Every year, [Warren)) Buffett reminds his CEOs how important personal integrity is to him. “He sends out this letter, and the opening paragraph is always the same,” [one of Buffet’s CEOs] says. “I’ve seen it enough times by now that I’ve got it memorized: ‘We can afford to lose money. We can afford to lose a lot of money. But we cannot afford to lose one shred of our reputation. Make sure everything you do can be reported on the front page of your local newspaper written by an unfriendly, but intelligent reporter.'” ((Russ Banham, “The Warren Buffett School,” Chief Executive, December 2002, downloaded from http://www.robertpmiles.com/BuffettSchool.htm, May 19, 2003.))
It’s the start of the calendar year, and one of my obligations as Dean is to complete regular training on ethics and avoidance of conflicts of interest, as required by the University of Virginia and the Commonwealth of Virginia. This annual drill reminds me of Warren Buffett’s annual letter to his CEOs. The Darden Community (as any enterprise) would benefit from such an annual reminder, so let me say it plainly: manage, study, lead, and work with integrity because
1. We cannot afford to lose one shred of our reputation.
2. We cannot afford to lose one talented member of our community, applicant, or corporate partner over an ethical lapse.
3. We cannot afford to lose our self-confidence and self-respect.
Working with integrity is hard–there are very few right-vs.-wrong ethical dilemmas; rather, the world of the general manager is mostly gray. My speeches, messages to the Darden community, and this blog are no strangers to discussion of integrity, values, honor, ethics, and the belief that we in the Darden Community are called to a higher standard of conduct than what passes for “average” in the business world. What others do is no guide for what’s right, a fact that was sadly discovered too late in cases such as Enron, WorldCom, Tyco, and, more recently, in the subprime loan boom. What’s right may differ substantially from what’s popular or convenient.
One hears numerous explanations for giving little or no attention to ethics in the workplace: we have no training in business ethics; it is embarrassing to discuss these things; we’re too busy making money; it’s a dog-eat-dog world; it’s not in my job description, and so on. If all this is true, why should we pause here at the start of the calendar year, to dwell on ethics? Consider these interrelated reasons:
Sustainability. Unethical practices are not a foundation for enduring, sustainable, enterprise. This first consideration focuses on the legacy one creates. What legacy do you want to leave? To incorporate ethics into our workplace mindset is to think about the kind of world that we would like to live in, and that our children will inherit. One might object that in a totally anarchic world, unethical behavior might be the only path to life. But this only begs the point: we don’t live in such a world. Instead, our world of norms and laws ensures a corrective process against unethical behavior.
Ethical behavior builds trust. Trust rewards. The branding of products seeks to create a bond between producer and consumer: a signal of purity, performance, or other attributes of quality. This bond is built by trustworthy behavior. As markets reveal, successfully branded products command a premium price. Bonds of trust tend to pay. If the fields of education and management were purely a world of one-off transactions, it would seem ripe for opportunistic behavior. But in the case of repeated contact, reputation can count for a great deal in shaping the expectations of the people one deals with. This implicit bond, trust, or reputation can translate into more effective and economically attractive business practice. The objection to this line of reasoning is that ethical behavior should be an end in itself. If you are behaving ethically only to get rich, then you are hardly committed to that behavior. Being ethical for pay is inauthentic. This is true. But it is a useful encouragement to all of us that ethical behavior need not entail pure sacrifice. Some might even see this as an imperfect means by which justice expresses itself.
Ethical behavior builds teams and leadership which underpin process excellence. Good business processes drive good outcomes. Stronger teams and leaders result in more agile and creative responses to problems. Ethical behavior contributes to the strength of teams and leadership by aligning employees around shared values, and building confidence and loyalty. An objection to this argument is that in some settings promoting ethical behavior is no guarantee of team-building. Indeed, teams might blow apart over disagreement about what is ethical or what action is appropriate to take. Typically, this is not the fault of ethics, but rather of team processes for handling disagreements.
Ethics sets a higher standard than laws and regulations. The law is a crude instrument: it tends to trail rather than anticipate behavior; it contains gaps that become recreational exploitation for the aggressive business person; Justice may neither be swift nor proportional to the crime; and as my colleague Andrew Wicks said, it “puts you in an adversarial posture with respect to others which may be counterproductive to other objectives in facing a crisis.” ((Andrew Wicks, 2003, “A note on ethical decision making.” Charlottesville VA: Darden Case Collection catalogue number UVA-E-0242, page 11.)) To use only the law as a basis for ethical thinking is to settle for the lowest common denominator of social norms. As former Chairman of the Securities and Exchange Commission, Richard Breeden, said, “It is not an adequate ethical standard to want to get through the day without being indicted.” ((Quoted in K.V. Salwen, 1991 “SEC Chief’s criticism of ex-managers of Salomon suggests civil action is likely,” Wall Street Journal Nov. 20, A10.))
Some might object to this line of thinking by claiming that in a pluralistic society, the law is the only baseline of norms on which society can agree. Therefore, isn’t the law a “good enough” guide to ethical behavior? But this this leads to a “compliance” mentality and that ethics takes one farther. Our former Darden colleague, Lynn Paine, writes, “Attention to law, as an important source of managers’ rights and responsibilities, is integral to, but not a substitute for, the ethical point of view—a point of view that is attentive to rights, responsibilities, relationships, opportunities to improve and enhance human well-being, and virtue and moral excellence.” ((Lynn S. Paine, 1999, “Law, ethics, and managerial judgment,” in R. E. Frederick, ed., A Companion to Business Ethics, Malden, MA: Blackwell, pages 194-195.))
Reputation and conscience. Motivating ethical behavior by appealing to benefits and avoiding costs is inappropriate. After all, the average annual income for a lifetime of car thievery (even counting years spent in prison) is large—it seems that crime does pay. If income were all that mattered, most of us would switch into this lucrative field. The business world features enough cheats and scoundrels to offer any professional the opportunity to break promises, or worse, for money. Ethical professionals decline these opportunities for reasons having to do with the kind of people they want to be.
The Darden Mission Statement calls us. We share expectations that create a community of trust. The faculty members reaffirm the Darden Mission Statement annually. It commits us to graduate “action-oriented graduates who … lead with integrity…”
These and other reasons should motivate all of us to walk the talk. Here is what you can do. First, encourage others around you to do what’s right. We are not an “anything goes” community. We have mutual expectations for exemplary behavior. No amount of messages from the Dean can top the impact of peer expectations. A community is only as strong as its most vulnerable link. Help those who may be headed in the wrong direction. Speak up for our values.
Second, if you see something, say something. The UVA honor system provides representatives with whom students and professors can share their concerns on a confidential basis. Similarly, faculty and staff members can share concerns with senior leaders, me, and/or Barbara Deily, Chief Audit Executive of the University. The mark of a good organization is not that it never has ethical lapses, but rather what it does about them. At Darden we must get the facts and take appropriate action as fast as possible.
Finally, at a personal level, make a commitment to go the extra mile for what’s right. Mahatma Gandhi said, “you must live the world you want to see.” If we want to live in a community of trust and integrity, we must live that behavior.